The WTO Global Trade Costs Index and Its Determinants

This study provides a decomposition of the WTO Global Trade Costs Index into five policy-relevant components: transport and travel costs; information and transaction costs; ICT connectedness; trade policy and regulatory differences; and governance quality. The WTO Global Trade Costs Index is based on a new methodology by Egger et al. (2021) that delivers directional trade cost estimates and sector-specific elasticities which are crucial for inferring trade costs from trade flows data. The resulting measure of trade costs includes all factors that burden foreign sales more than domestic ones. In this study, we run a sectoral regression analysis to determine what drives trade costs variation across partners and use the results to decompose the variation in trade costs in each sector.