Trade frictions and welfare in the gravity model: how much of the iceberg melts?
A key element missing from the structural gravity literature is an examination of the implied general equilibrium. By design the gravity equation is adept at predicting bilateral trade flows. To make inferences beyond trade flows, however, the theoretic models should be consistent with other observables. Structural econometric estimates from Anderson and van Wincoop (2003) allow us to evaluate their proposed general equilibrium along several dimensions. We find that their gravity model predicts too large a difference between consumer and producer prices; excessive variation in the geographic distribution of consumer price indices; and an exceptionally large portion of output devoted to overcoming trade frictions. Under plausible parameterizations of the model at least 50% of output `melts' in transit.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 39 (2006)
Issue (Month): 1 (February)
|Contact details of provider:|| Postal: |
Web page: http://economics.ca/cje/Email:
More information through EDIRC
|Order Information:|| Web: http://economics.ca/en/membership.php Email: |
When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:39:y:2006:i:1:p:247-265. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.