Using the gravity equation to differentiate among alternative theories of trade

Using the gravity equation to differentiate among alternative theories of trade The simple gravity equation explains a great deal about the data on bilateral trade flows and is consistent with several theoretical models of trade. We argue that alternative theories nevertheless predict subtle differences in key parameter values, depending on whether goods are homogeneous or differentiated and whether or not there are barriers to entry. Our empirical work for differentiated goods delivers results consistent with the theoretical predictions of the monopolistic‐competition model, or a reciprocal‐dumping model with free entry. Homogeneous goods are described by a model with national (Armington) product differentiation or by a reciprocal‐dumping model with barriers to entry. JEL Classification: F10, F12 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Canadian Journal of Economics/Revue Canadienne D'économique Wiley

Using the gravity equation to differentiate among alternative theories of trade

Loading next page...
 
/lp/wiley/using-the-gravity-equation-to-differentiate-among-alternative-theories-rQukcLUsAp
Publisher
Wiley
Copyright
Copyright © 2001 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0008-4085
eISSN
1540-5982
DOI
10.1111/0008-4085.00082
Publisher site
See Article on Publisher Site

Abstract

The simple gravity equation explains a great deal about the data on bilateral trade flows and is consistent with several theoretical models of trade. We argue that alternative theories nevertheless predict subtle differences in key parameter values, depending on whether goods are homogeneous or differentiated and whether or not there are barriers to entry. Our empirical work for differentiated goods delivers results consistent with the theoretical predictions of the monopolistic‐competition model, or a reciprocal‐dumping model with free entry. Homogeneous goods are described by a model with national (Armington) product differentiation or by a reciprocal‐dumping model with barriers to entry. JEL Classification: F10, F12

Journal

Canadian Journal of Economics/Revue Canadienne D'économiqueWiley

Published: May 1, 2001

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off