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Gravity, Productivity and the Pattern of Production and Trade

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  • James E. Anderson

Abstract

The effects of geography and productivity on the global pattern of production are captured here in a specific factors gravity model. Simple enough for sharp results, the model is yet rich enough to contain the high dimensional productivity frictions in production and distribution of a many country world. The starting point is the international incidence of productivity frictions inferred from gravity. Sellers’ and buyers’ incidence both reduce real income. Sellers’ incidence shocks reduce sectoral skill premia. Bigger sellers’ incidence by country (sector) reduces equilibrium shares of world (national) GDP. In contrast to the generalized Ricardian gravity model of Eaton and Kortum (2002), relative factor endowments play a role and import-competing production and wage premia in exporting are featured.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14642.

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Date of creation: Jan 2009
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Handle: RePEc:nbr:nberwo:14642

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  1. James E. Anderson, 2008. "Globalization and Income Distribution: A Specific Factors Continuum Approach," Boston College Working Papers in Economics, Boston College Department of Economics 699, Boston College Department of Economics.
  2. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1029-46, December.
  3. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3714, London School of Economics and Political Science, LSE Library.
  4. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," NBER Working Papers 14423, National Bureau of Economic Research, Inc.
  5. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 67-97, March.
  6. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 441-487, 05.
  7. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, American Economic Association, vol. 69(1), pages 106-16, March.
  8. Helpman, Elhanan & Razin, Assaf, 1978. "A theory of international trade under uncertainty," MPRA Paper 22112, University Library of Munich, Germany.
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Cited by:
  1. James E. Anderson, 2009. "Globalization and Income Distribution: A Specific Factors Continuum Approach," NBER Working Papers 14643, National Bureau of Economic Research, Inc.
  2. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2010. "The Trade Effects of Endogenous Preferential Trade Agreements," SOI - Working Papers 1013, Socioeconomic Institute - University of Zurich.
  3. James E. Anderson & Yoto V. Yotov, 2011. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," Boston College Working Papers in Economics, Boston College Department of Economics 780, Boston College Department of Economics, revised 11 Oct 2011.
  4. Prehn, Sören & Brümmer, Bernhard & Thompson, Stanley R., 2010. "Payment decoupling and the intra-European calf trade," DARE Discussion Papers 1008, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
  5. Larch Mario & Lechthaler Wolfgang, 2011. "Comparative Advantage and Skill-Specific Unemployment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-58, April.
  6. Felix Chan & Mark N. Harris & William Greene & László Kónya, 2014. "Gravity Models of Trade: Unobserved Heterogeneity and Endogeneity," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 14-08, New York University, Leonard N. Stern School of Business, Department of Economics.

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