Abstract:

Abstract Capital goods play a major role in international trade. World production of capital goods and R&D activity are highly concentrated in some developed countries. Most of the countries, especially developing countries import the most of their capital equipment from some leading capital goods exporter countries. Therefore technological advances can be transmitted across borders through trade in capital goods. In international trade countries face trade costs. Trade costs can be in the form of transportation costs, quota, tariffs etc. The focus of this study is on trade barriers on the capital goods implied by the pattern of bilateral trade. I recover trade costs from bilateral trade equation using the United Nations' International Comparison Program (ICP)'s price and bilateral trade data without imposing any restriction on the form of trade costs.

Keywords: