Short Run Gravity / James E. Anderson, Yoto V. Yotov.

Format:

Book

Author/Creator:

Anderson, James E.

Contributor:

National Bureau of Economic Research.

Yotov, Yoto V.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23458.

NBER working paper series no. w23458

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

Short run gravity is a geometric weighted average of long run gravity and bilateral capacity. The model features (i) joint trade costs endogenous to bilateral volumes, (ii) long run gravity as a limiting case of efficient investment in bilateral capacities, (iii) a structural ratio of short run to long run trade elasticities equal to a micro-founded buyers' incidence elasticity, and (iv) tractable short and long run models of the extensive margin. Application to manufacturing trade of 52 countries during the globalization period 1988-2006 strongly supports the model. Results solve several time invariance and trade elasticity puzzles in the literature.

Notes:

Print version record

May 2017.