at Google ScholarTitle data
Bergstrand, Jeffrey H. ; Egger, Peter ; Larch, Mario:
Gravity Redux : Estimation of Gravity-Equation Coefficients, Elasticities of Substitution, and General Equilibrium Comparative Statics under Asymmetric Bilateral Trade Costs.
In: Journal of International Economics.
Vol. 89
(2013)
Issue 1
.
- pp. 110-121.
ISSN 0022-1996
DOI: https://doi.org/10.1016/j.jinteco.2012.05.005
Abstract in another language
A large class of models with CES utility and iceberg trade costs are now known to generate isomorphic “gravity equations.” Economic interpretations of these gravity equations vary in terms of two basic elements: the exporter's “mass” variable and the elasticity of trade with respect to true ad valorem “trade costs.” In this paper, we offer three potential contributions. First, we formulate and estimate a structural gravity equation based on the standard Krugman model of monopolistic competition and increasing returns. In the context of this model, a key parameter, the elasticity of substitution in consumption (σ), can be estimated precisely – even without observable true ad valorem trade-cost measures – using exporter's population and observable variables that influence trade costs. Second, in the empirical context of the well-known McCallum Canadian–U.S. “border puzzle,” our approach – allowing estimation of σ – yields considerably different general equilibrium comparative static trade-flow and economic welfare effects than those in an Armington endowment economy and assumed values of σ. Moreover, our predicted trade flows and GDPs are highly correlated with their respective observed values in the case of bilaterally symmetric or asymmetric Canadian–U.S. border effects. Third, a Monte Carlo analysis confirms unbiased and precise estimates of all coefficients, the elasticity of substitution, and comparative statics using our approach.
Further data
| Item Type: | Article in a journal |
|---|---|
| Refereed: | Yes |
| Keywords: | Gravity equation; International trade; Structural estimation; Trade costs |
| Subject classification: | F10; F12; F13 |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VI: Empirical Economic Research Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VI: Empirical Economic Research > Chair Economics VI: Empirical Economic Research - Univ.-Prof. Dr. Mario Larch Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics |
| Result of work at the UBT: | Yes |
| DDC Subjects: | 300 Social sciences > 330 Economics |
| Date Deposited: | 14 Oct 2015 12:10 |
| Last Modified: | 20 Jan 2022 12:55 |
| URI: | https://eref.uni-bayreuth.de/id/eprint/16591 |