Trade costs, a twofold empirical analysis - The persistent effect of Roman roads on Italian provincial trade costs and the determinants of country trade costs by geographies

Starting from early two thousands, the interest of trade literature on trade costs has grown exponentially. Theoretical and empirical studies have focused on the importance of trade costs as main drivers in international economics and as one of the major causes that impedes trade between and across nations. Trade costs matter. Decline and rise of trade costs over time describe trade booms and busts in the past 150 years. They play a fundamental role in economic welfare, growth and development. And the research on the structure of trade costs, on the best method to measure them and on what determines trade costs is far from being complete. This thesis is completely devoted to the trade costs subject and, in particular, to the indirect method of computing trade costs according to the ʽtop-downʼ approach proposed by the pioneering work of Novy in 2013. In order to provide the best overview on this theme and in order to add new knowledge to the trade costs literature, the research behind this thesis has been structured in three main chapters: one theoretical and two empirical. One of the two empirical applications includes also an instrumental chapter which gives account of a new data set constructed ad hoc for the first empirical investigation. The first chapter is the theoretical support of the following two empirical analyses. It presents a detailed survey on trade costs from different perspectives, focusing on the indirect measure of trade costs, the dependent variable exploited in both following empirical investigations. The chapter leaves space for new thoughts on the indirect measure of trade costs, adding new reflections to the existing literature. The first empirical application looks at the persistent effect of the Roman road network on current Italian provincial trade costs. This investigation presents three novelties. First, it is the earliest that studies the long-term effects of Roman roads using a measure in kilometres by province created specifically for this empirical application. Second, the approach exploited to measure Roman roads at the Italian provincial level can be easily extended to other more detailed or simpler investigations, at country or different sub-country levels and to one or more countries. Since the importance of this new data set, an entire chapter has been devoted to its presentation and explanation. Third, and most important, the empirical application on the persistent effect of the Roman road infrastructure is the first, to the author's knowledge, that uses an indirect measure of trade costs at the provincial level. The main idea behind the chapter is that history matters and that the Roman road infrastructure is affected by a legacy that lasted for more than two thousand years. The second empirical application investigates on the best sources of trade costs, using a large data set of possible trade costs determinants, exploring these determinants by geographies of countries and for a wide number of nations. The novelty of this analysis lies exactly in the topic of the chapter. Due data constraints and measurement problems, the investigation on the determinants of trade costs is hard. It is harder if considering a large sample of countries and it is harder if distinguishing countries by geography. In this chapter, geography is measured in terms of ʽdegree of insularityʼ. The main idea behind it, is that geography matters. It matters when measuring trade costs and it matters when assessing the main sources of trade costs. The explanation of the main sources of trade costs by geographies of countries allows to better address policy makers in defining strategies and solutions to make trade less costly.