also mark-up differences (Cosar, Grieco and Tintelnot, 2015).

A rare attempt to overcome these challenges by Atkin and Donaldson (2015) applies the price-gaps methodology to estimate trade costs in Ethiopia and Nigeria. The authors use data on prices of a number of staple consumer goods collected by statistical agencies for constructing the consumer price index, addressing the first challenge. Complementing the price data with the origin information for the goods, they overcome the second challenge.<sup>8</sup> Moving away from perfect competition and featuring oligopolistic intermediaries, their model addresses the third challenge. Finally, to allow a comparison to a developed country, they also estimate trade costs using U.S. data.

The results suggest an economically large difference between trade costs in the two African countries relative to the US. The costs of trading goods to the most remote compared to the least remote location is 9 cents in Ethiopia and 13 cents in Nigeria. In the US, the same distance costs only 2 cents. In terms of the marginal trade cost with respect to geodesic distance, the cost is 3.53 times higher in Ethiopia and 5.26 times higher in Nigeria than in the US, respectively.

Noting that these estimates encompass not just transportation but other costs of trading, a natural question for the purposes of this review is how to unpack the contribution of freight costs to this inter-country difference. In one exercise, the authors replace their geodesic distance metric with the fastest travel time measure. Since the U.S. is better endowed with higher quality roads, a change in relative costs is informative about the role of infrastructure. As a result, the estimated marginal cost difference between the two African countries and the U.S. drops to 2.46 for Ethiopia and to 4 for Nigeria. Comparing with full costs at face value, infrastructure explains about 24-30% of these countries’ cost gap with the U.S. While this is not a trivial magnitude itself, it is likely to be a lower bound for the impact of infrastructure since omitted factors such as the cost and quality of transportation equipment, and fuel costs, are likely to interact with road quality.

Although the countries under study differ, it is noteworthy to compare the estimates from Atkin and Donaldson (2015) with the direct evidence from trucker surveys by Teravaninthorn and Raballand (2009), as the authors also do. The latter is reported in terms of per km cost for one truckload shipment, but in comparison, both the estimates and survey-based actual costs are expressed relative to the U.S. Estimated marginal cost of shipping relative to the U.S. mentioned above (2.56 and 4 in Ethiopia and Nigeria, respectively) are in the ballpark with the results from Teravaninthorn and Raballand 8 Origins are either identifiable production plants within each country or the main international port for imports. Asturias et al. (2019) follow a similar strategy and use prices charged by monopolists in different destinations to estimate transport costs in India from price differentials. Reduced price gaps after the construction of the Golden Quadrilateral highway are informative about the pro-competitive effect of reduced transport costs. Similarly, Donaldson (2018) uses price gaps in salt, a commodity produced in unique locations, to infer transport cost reducing effect of railroad construction in 19th century India.

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