This study estimates the degree of trade freeness based on trade costs
between Korea and 80 trading partners from 1990 to 2008. The approach
follows two stage: first, to introduce a trade freeness parameter from New
Economic Geography literatures; second, to estimate border effects by
eliminating the effects resulted from exogenous variables such as geographic
distances, languages, religions and human network effects from trade freeness
parameters. The results show that trade freeness parameters tend to be high
with Asian countries which implies geographic proximity lowers transaction
costs. While eliminating exogenous effects from trade freeness parameters
using Random Mixed Model, we found that human network also lowers the
trade cost as geographic proximity does. Based on the estimated border
effects, the degree of trade freeness between Korea and trading partners has
increased 2.3% yearly on average and especially freeness with emerging
exporting countries is relatively higher than with others.