product is produced or sourced from (origin locations) and where it is finally sold by retailers (destination locations) typically summarizes the contribution of transport costs to overall trade costs. However, there may be other variables that can be correlated with distance which can also affect trade costs, such as the extent of competition between logistics operators, distributors or retailers (Atkin and Donaldson, 2015) or within-country “border-effects” (Borraz, Cavallo, Rigobon and Zipitria, 2016).

In this paper, we follow the price-differential approach and apply the methodology developed by Atkin and Donaldson (2015), which aims at estimating trade costs while taking into account the possibility of imperfect competition among intermediaries, controlling for spatial variation in markups. We find that intra-national trade costs in our sample of countries are between 2.5 and 14 times larger than previous estimates for the U.S. by Atkin and Donaldson (2015) using the same methodology.

This paper relates to a growing literature that attempts to estimate intra-national trade costs. Given its historically high transport costs, Africa, and in particular SubSaharan Africa, has been the focus of several papers studying trade and transport prices. Bougna et al. (2020) estimate intra-national trade costs in Rwanda using data on rural markets and find them to be 10 times higher than in the U.S. They also find that markups are higher in locations with fewer traders. Mayneris, Martin and Theophile (2020) document spatial differences in the cost of living across Ethiopian cities and find that more remote cities show significantly higher prices, less product availability, and a higher cost of living. Porteous (2019) takes a different methodological approach to Atkin and Donaldson (2015) to estimate intra-national trade costs in Sub-Saharan Africa. The paper focuses on staple cereal grains traded between 230 large regional hubs in 42 countries, and quantifies trade costs by estimating a structural model that features competitive traders (i.e., abstracting from markups), grain consumption, storage, and trade. The results in Porteous (2019) suggest trade costs that are qualitatively similar but higher in magnitude to those estimated in Atkin and Donaldson (2015), although the former potentially include nondistance dependent factors. Specifically, the median trade cost is over 5 times higher than international benchmark freight rates. In a counterfactual where trade costs on overland links are reduced to levels similar to the rest of the world, grain prices fall 30% on average and aggregate welfare increases by 1.6% of GDP. Teravaninthorn and Raballand (2009) estimate trade costs using trucker surveys in the U.S. and along several major transport corridors in Sub-Saharan Africa and find 1.88 to 3.28 times higher trade costs compared to the U.S., which are lower than the results of Atkin and Donaldson (2015). In terms of the trade costs in high-income countries, Agnosteva, Anderson and Yotov (2019) use gravity model techniques to understand the effects of intra-regional, inter-regional and international frictions on trade flows in Canadian provinces, and find that further and less-developed regions tend to have relatively low internal frictions and large border effects, while economically more developed and central regions show relatively low border barriers.

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