Heterogeneity in trade costs reshapes global trade patterns and economies.
The article explores how differences in trade costs and productivities affect international trade patterns and the economy. By using a model with two countries producing various goods, the researchers show that not all goods are traded due to varying trade costs and productivity levels. This challenges the traditional view that only the most productive goods are traded. The study highlights that trade costs, such as tariffs and shipping expenses, vary widely across different types of goods and significantly impact trade decisions.