On Gravity, Specialization and Intra‐industry Trade
AbstractThis paper derives the necessary and sufficient condition for the simple gravity equation to hold: the market share of an exporting country is constant across all importing countries. Specialization is just one example satisfying this condition. It holds in a variety of situations where multiple producers compete with a homogeneous good.Further, this paper shows that the ratio of bilateral trade to the product of partner incomes is increasing in the extent of specialization and in the intensity of intra-industry trade. Since the relationship is not model-specific, the correlations among these variables do not support any specific model.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 19 (2011)
Issue (Month): 3 (08)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
Other versions of this item:
- E. Young Song, 2010. "On Gravity,Specialization and Intra-industry Trade," Working Papers 1007, Research Institute for Market Economy, Sogang University.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Nicita, Alessandro & Olarreaga, Marcelo, 2001. "Trade and production, 1976-99," Policy Research Working Paper Series 2701, The World Bank.
- Robert C. Feenstra & James A. Markusen & Andrew K. Rose, 1998.
"Undertstanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods,"
NBER Working Papers
6804, National Bureau of Economic Research, Inc.
- Feenstra, Robert & Markusen, James R. & Rose, Andrew K, 1998. "Understanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods," CEPR Discussion Papers 2035, C.E.P.R. Discussion Papers.
- Carolyn L. Evans, 2003. "The Economic Significance of National Border Effects," American Economic Review, American Economic Association, vol. 93(4), pages 1291-1312, September.
- E. Yong Song & Chen Zhao, 2012. "Does Specialization Matter for Trade Imbalance at Industry Level?," Working Papers 1210, Research Institute for Market Economy, Sogang University.
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