Abstract

Despite the extent of international trade barriers, direct measurement of trade barriers and trade costs for large numbers of countries in long periods is hardly possible in practice due to severe data limitations. To avoid this problem, present study introduces a micro-founded measure of aggregate bilateral trade costs and as a practical application computes bilateral trade costs for a number of Iran's major export trading partners. Based on results, over 1995 to 2010, Iran's trade costs with major export partners declined by about 28 percent on average, while the same figure for China, India and Turkey was over 32 percent. Based on estimated regression, bilateral trade 
costs with distance and tariff rate variables is positively related whereas island, 
adjacency, and bilateral trade agreement variables have the opposite effect on Iran's bilateral trade costs. Finally based on results it was suggested that for increase power contest of export, products should be destined based on trade costs.