Kazutaka Takechi, 16 July 2015

With mega trade deals currently being negotiated, it is imperative to fully understand the various effects of trade policy. This column focuses on the implications of product quality and the type of trade costs for trade policy. Using data on agricultural prices from Japan, it argues that specific trade costs are more sensitive to geographic distance than ad valorem costs. The welfare effects of policy initiatives such as improving infrastructure may hence be larger than previously thought.

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