Treb Allen’s paper offers a framework to understand the role of information frictions in trade and to quantify their effects. Information frictions can be caused by several factors, including the growing number of regulatory standards for manufactured and agricultural goods that exporters need to meet to access export markets. The paper focuses on one type of information friction, namely price information from various potential markets, and finds that such frictions, more than transportation costs, account for a large part of trade costs. In the judgement of the Academic Selection Panel, his paper contributes significantly to understanding the changing nature of trade costs and their relation to trade flows.

The Academic Selection Panel also decided to give a special mention as runner-up to Pablo Fajgelbaum of the University of California, Los Angeles (UCLA), for his work entitled Labor Market Frictions, Firm Growth, and International Trade. This article develops a theoretical framework for studying the impact of labour market institutions on export dynamics and the gains from trade. The paper provides empirical evidence consistent with a number of the model’s key predictions, including that labour market rigidities negatively affect export participation by limiting firms’ growth. According to the Academic Selection Panel, this is an extremely well-executed paper that offers new insights into the role of trade and labour policies on export flows.

Treb Allen is an American national. He studied political economy at Williams College before obtaining a Ph.D. in Economics from Yale University, United States. He is currently a Fellow at the International Economics Section at Princeton University and will be joining the Economics Department of Northwestern University (US) as an Assistant Professor in 2013.

Pablo Fajgelbaum is an Argentinian national. He studied economics at the University Torquato di Tella in Argentina and later received a Ph.D. in economics from Princeton University (USA).  He is currently an Assistant Professor in the Economics Department at University of California, Los Angeles (US).

The Academic Selection Panel for 2012 comprised Dr Avinash Dixit (Emeritus Professor of Economics, Princeton University), Dr Patrick Low (Director, Economic Research and Statistics Division, WTO), Dr Robert Staiger (Professor of Economics, Wisconsin University), Dr Alberto Trejos (Professor of Economics, INCAE Business School). Dr Michele Ruta (Counsellor, Economic Research and Statistics Division, WTO) coordinated the work of the Panel.

The first edition of the WTO Essay award was launched in April 2009.