International trade costs in OECD countries

International trade has grown considerably over the last few decades. This increase can be attributed to several factors, among them a decline in international trade costs such as the decline in transportation costs and tariffs. A gap in the literature has been observed in understanding and measuring the concept of real trade costs and their impact on international trade. This paper tries to assess and estimate the impact of trade costs on international trade for main trade sectors like agriculture, manufacturing, machinery and transportation equipment, as well as chemicals. This is achieved by employing a gravity equation model and using a panel data of trade flows (2004–2014) across the 34 OECD member countries. Results demonstrate that–beyond the “classical” variables that affect trade costs–maritime transport connectivity, number of days and number of documents required for the export process are important determinants of bilateral trade costs.