The shell command<br />"/var/www/moodle/filter/tex/mimetex.linux" -e "/mnt/efs/moodledata/filter/tex/448055a077ad117d0f9bf62fccb958f9.svg" -- '\Large \bar{t}_{i j t}^{k}\is
    generally much larger in magnitude than the rates of protection trade
    economists are used to dealing with in measures such as the Overall Trade
    Restrictiveness Index (OTRI) or average applied tariffs. 
Once the Novy (2010) trade cost measure has been calculated for a range of
    countries, it is possible to use an econometric decomposition to assess the
    impact of different factors on the overall level of trade costs. Shepherd (2011)
    adopts this approach to examine the impact of logistics performance on total
    trade costs in the Maghreb region (Table 5). Logistics costs are captured by a
    rescaled version of the LPI, 39
    in which a higher score indicates poorer performance. Results show that
    logistics performance is clearly an important determinant of trade costs in this
    sample of countries: increasing logistics performance by 10% would tend to
    decrease trade costs by 6.5% in manufacturing and 8% in agriculture. 
Table 5: Regression Results Using Log(Trade Costs) as the Dependent Variable, 2007 Only. Source: Shepherd (2011). 


    
        
            
            (1)Manufacturing
            (2)Agriculture
            (3) Energy
        
    
    
        
            Log(Logistics Costs)
            0.653***(0.000)
            0.808***(0.000)
            -0.061(0.668)
        
        
            Log(Tariff)
            1.943(0.415)
            -2.786*(0.100)
            -115.840***(0.002)
        
        
            Log(Distance)
            0.397***(0.000)
            0.467***(0.000)
            0.372***(0.000)
        
        
            No Common Border
            0.207**(0.037)
            0.282**(0.011)
            0.225*(0.057)
        
        
            No Common Language
            0.190**(0.011)
            0.126(0.228)
            -0.038(0.704)
        
        
            No Colonial Relationship
            0.426**(0.001)
            0.050(0.652)
            0.192(0.278)
        
        
            No Common Colonizer
            0.055(0.564)
            -0.186(0.312)
            -0.344(0.191)
        
        
            Constant
            -3.961***(0.000)
            -3.476***(0.000)
            -1.582***(0.002)
        
        
            R2Observations
            0.620336
            0.579448
            0.357322
        
    
Note: P-values based on robust standard errors corrected for clustering by country
    pair are forbiddenkeyword_included in parentheses below the parameter estimates. Statistical significance is indicated by *
    (10%), ** (5%), and *** (1%). 
To illustrate the relative importance of the various factors as determinants of
    overall trade costs, Chen and Novy (2010) suggest a variance decomposition
    approach. The percentage of the observed variance in trade costs accounted
    for by logistics, for example, is given by the following expression: 
\( \text { Variance } \%=\beta_{1} \frac{\operatorforbiddenkeyword_name{cov}\left[\log \left(\bar{t}_{i j}^{k}\right), \log \left(\overline{\operatorforbiddenkeyword_name{Logistlcs}_{i j}}\right)\right]}{\operatorforbiddenkeyword_name{var}\left[\log \left(\bar{t}_{i j}^{k}\right)\right]} '<br />returned status = 126<br />
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