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It is costly to acquire information about markets in other places, especially m developing countries. In this dissertation, I examine the effect of such information frictions on trade. I embed a process where heterogeneous producers sequentially search across regions to determine where to sell their produce into a perfect competition Ricardian trade model. Information frictions explain the empirical failure of price arbitrage and provide new insight into how market conditions affect trade flows. Using a data set assemble on regional agricultural trade in the Philippines, I show that observed trade flows and prices suggest the presence of substantial information frictions. I then structurally estimate the model to disentangle information frictions from transportation costs. I find that (1) estimated transportation costs are half as large as those implied by complete information models and more consistent with observed freight costs; and (2) the vast majority (93 percent) of the "gravity" relationship between trade flows and distance can be attributed to information frictions rather than transportation costs.
Advisor: | Arkolakis, Costas |
Commitee: | |
School: | Yale University |
School Location: | United States -- Connecticut |
Source: | DAI-A 73/12(E), Dissertation Abstracts International |
Source Type: | DISSERTATION |
Subjects: | Economics |
Keywords: | Gravity equation, Information frictions, Philippines, Traders |
Publication Number: | 3525204 |
ISBN: | 978-1-267-57489-3 |