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Gravity Without Apology: the Science of Elasticities, Distance and Trade

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  • Céline Carrère
  • Monika Mrázová
  • J Peter Neary

Abstract

Gravity as both fact and theory is one of the great success stories of recent research on international trade, and has featured prominently in the policy debate over Brexit. We first review the facts, noting the overwhelming evidence that trade tends to fall with distance. We then introduce some expository tools for understanding constant-elasticity-of-substitution theories of gravity as a simple general-equilibrium system. Next, we point out some anomalies with the theory: mounting evidence against constant trade elasticities, and implausible predictions for bilateral trade balances. Finally, we sketch an approach based on subconvex gravity as a promising direction to resolving them.

Suggested Citation

  • Céline Carrère & Monika Mrázová & J Peter Neary, 2020. "Gravity Without Apology: the Science of Elasticities, Distance and Trade," The Economic Journal, Royal Economic Society, vol. 130(628), pages 880-910.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:628:p:880-910.
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    Cited by:

    1. Natalie Chen & Dennis Novy, 2022. "Gravity and Heterogeneous Trade Cost Elasticities," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1349-1377.
    2. Chen, Jingjing & Chen, Wei & Liu, Ernest & Luo, Jie & Song, Zheng, 2025. "The economic cost of locking down like China: Evidence from city-to-city truck flows," Journal of Urban Economics, Elsevier, vol. 145(C).
    3. Yoto V. Yotov, 2022. "Gravity at Sixty: The Workhorse Model of Trade," CESifo Working Paper Series 9584, CESifo.
    4. Gang Chen & Xue Dong & Patrick Minford & Guanhua Qiu & Yongdeng Xu & Zequn Xu, 2022. "Computable General Equilibrium Models of Trade in the Modern Trade Policy Debate," Open Economies Review, Springer, vol. 33(2), pages 271-309, April.
    5. Kelvin Balcombe & Dylan Bradley & Iain Fraser, 2021. "Do Consumers Really Care? An Economic Analysis of Consumer Attitudes Towards Food Produced Using Prohibited Production Methods," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(2), pages 452-469, June.
    6. Peter Egger & Reto Foellmi & Ulrich Schetter & David Torun, 2023. "Gravity with History: On Incumbency Effects in International Trade," Growth Lab Working Papers 219, Harvard's Growth Lab.
    7. David M. Kemme & Bhavik Parikh & Tanja Steigner, 2021. "Inequality, autocracy, and sovereign funds as determinants of foreign portfolio equity flows," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(2), pages 249-278, June.
    8. Bernhard Schuetz, 2022. "Investment booms, diverging competitiveness and wage growth within a monetary union: An AB-SFC model," ICAE Working Papers 138, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    9. Lucía Bolea & Rosa Duarte & Geoffrey J. D. Hewings & Sofía Jiménez & Julio Sánchez‐Chóliz, 2022. "The role of regions in global value chains: an analysis for the European Union," Papers in Regional Science, Wiley Blackwell, vol. 101(4), pages 771-794, August.
    10. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.
    11. Naudé, Wim & Cameron, Martin, 2025. "Retaliation Against Trump’s Trade War: Why and How the EU Should Find Alternative Export Markets," IZA Discussion Papers 17773, Institute of Labor Economics (IZA).
    12. Mugnier, Martin & Wang, Ao, 2022. "Identification and (Fast) Estimation of Large Nonlinear Panel Models with Two-Way Fixed Effects," The Warwick Economics Research Paper Series (TWERPS) 1422, University of Warwick, Department of Economics.
    13. Minford, Patrick & Xu, Yongdeng & Dong, Xue, 2023. "Testing competing world trade models against the facts of world trade," Journal of International Money and Finance, Elsevier, vol. 138(C).
    14. Georg Schneider & Frank Stähler & Georg U. Thunecke, 2022. "The (Non-)Neutrality of Value-Added Taxation," CESifo Working Paper Series 9663, CESifo.
    15. repec:ags:aaea22:335917 is not listed on IDEAS
    16. Timothy G. Conley & Bill Dupor & Mahdi Ebsim & Jingchao Li & Peter B. McCrory, 2020. "A Local-Spillover Decomposition of the Causal Effect of U.S. Defense Spending Shocks," Working Papers 2020-014, Federal Reserve Bank of St. Louis.
    17. Alessandro Nicita & Enxhi Tresa, 2023. "The heterogeneous effects of trade policy on trade resilience during the 2020 trade downturn," The World Economy, Wiley Blackwell, vol. 46(10), pages 3048-3056, October.
    18. Wilcox, Steven W. & Barrett, Christopher B. & Jensen, Nathaniel & Sun, Ying & Clark, Patrick & Soto, Gerardo E. & Kahiu, Njoki & Fava, Francesco P. & Porter, Benjamin, 2023. "The Environmental Impacts of Microfinance: An Empirical Study of Index-Based Livestock Insurance and East African Rangelands," 2023 Annual Meeting, July 23-25, Washington D.C. 335917, Agricultural and Applied Economics Association.
    19. Bergstrand, Jeffrey H. & Clance, Matthew W. & Santos Silva, J.M.C., 2025. "The tails of gravity: Using expectiles to quantify the trade-margins effects of economic integration agreements," Journal of International Economics, Elsevier, vol. 157(C).
    20. Alessandro Nicita & Enxhi Tresa, 2022. "Trade policy and trade resilience during the 2020 trade downturn," UNCTAD Working Papers #1, United Nations Conference on Trade and Development.
    21. Wim Naudé & Martin Cameron, 2021. "Export-Led Growth after COVID-19: The Case of Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 52, pages 7-53, July.
    22. Lampe, Markus & O’Rourke, Kevin Hjortshøj & Reiter, Lorenz & Yotov, Yoto V., 2025. "The Empire project: Trade policy in interwar Canada," Journal of International Economics, Elsevier, vol. 153(C).
    23. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    24. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).

    More about this item

    JEL classification:

    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F10 - International Economics - - Trade - - - General

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