Asymmetric trade costs


Iowa’s Michael Waugh says trade costs are very asymmetric (pdf):

Poor countries import a larger volume of goods from rich countries, than rich countries
import from poor countries. Furthermore, there is little difference in comparable price indices
for tradable goods between rich and poor countries. Standard empirical implementation of the
gravity model with distance and other symmetric relationships for trade costs cannot account for
both of these facts. To account for these facts, I argue that trade costs must be systematically
asymmetric with poor countries facing higher costs to export relative to rich countries. I then
demonstrate that asymmetry is quantitatively important accounting for at least a third of the
variation in bilateral tradeā€”on par or more important than distance and other symmetric