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Dynamic gravity: endogenous country size and asset accumulation

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  • María Pía Olivero
  • Yoto V. Yotov

Abstract

Numerous gravity applications have resorted to panel data econometric techniques over the past decade. However, with the theory of gravity being so far only static, these estimations lack solid structural dynamic foundations. As a consequence, a consensus on a unified dynamic gravity estimation approach is yet to be reached. In this paper, (i) we build the theoretical foundations for a dynamic gravity model, (ii) we provide guidance for gravity-type estimations with panel data and we consider applications, and (iii) we calibrate and simulate our model to compare its properties with those of the standard, static gravity setup.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 1 (February)
Pages: 64-92

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Handle: RePEc:cje:issued:v:45:y:2012:i:1:p:64-92

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  1. Sergio de Nardis & Roberta De Santis & Claudio Vicarelli, 2008. "The Euro's Effects on Trade in a Dynamic Setting," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 73-85, June.
  2. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
  3. James E. Anderson & Yoto V. Yotov, 2010. "Specialization: Pro- and Anti-globalizing, 1990-2002," NBER Working Papers 16301, National Bureau of Economic Research, Inc.
  4. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
  5. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 315-356, October.
  6. Carlos Casacuberta & N�stor Gandelman, 2012. "Protection, Openness, and Factor Adjustment: Evidence from the Manufacturing Sector in Uruguay," Economic Development and Cultural Change, University of Chicago Press, vol. 60(3), pages 597 - 629.
  7. Kai Sun & Daniel J. Henderson & Subal C. Kumbhakar, 2011. "Biases in approximating log production," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(4), pages 708-714, 06.
  8. James E. Anderson & Yoto V. Yotov, 2011. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," NBER Working Papers 17003, National Bureau of Economic Research, Inc.
  9. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
  10. Richard Baldwin & Frauke Skudelny & Daria Taglioni, 2005. "Trade effects of the euro - evidence from sectoral data," Working Paper Series 446, European Central Bank.
  11. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," NBER Working Papers 14423, National Bureau of Economic Research, Inc.
  12. Campbell, Douglas L., 2010. "History, culture, and trade: a dynamic gravity approach," MPRA Paper 24014, University Library of Munich, Germany.
  13. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November.
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Cited by:
  1. Felbermayr, Gabriel & Grossmann, Volker & Kohler, Wilhelm, 2012. "Migration, International Trade and Capital Formation: Cause or Effect?," IZA Discussion Papers 6975, Institute for the Study of Labor (IZA).
  2. Lastauskas, Povilas & Bičiūnaitė, Audrė, 2012. "Strategies for Deeper Integration: Case Study of the Baltics," MPRA Paper 43321, University Library of Munich, Germany.
  3. Douglas Campbell, 2012. "Estimating the Impact of Currency Unions on Trade Using a Dynamic Gravity Framework," Working Papers 121, University of California, Davis, Department of Economics.

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