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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.

Suggested Citation

  • María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:1:p:64-92
    DOI: 10.1111/j.1540-5982.2011.01687.x
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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