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Dynamic gravity: endogenous country size and asset accumulation

Author

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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. De nombreuses applications du modèle de gravité ont eu recours à des techniques économétriques de données de panel au cours de la dernière décennie. Cependant, la théorie de la gravité demeurant statique pour le moment, ces estimations manquent de fondements structurels dynamiques solides. En conséquence, on n’a pas fait consensus sur une approche unifiée à l’estimation de modèles de gravité dynamique. Dans ce mémoire, (i) on construit les fondements théoriques d’un modèle de gravité dynamique; (ii) on suggère uen façon de procéder pour l’estimation de modèles de gravitéà l’aide de données de panel, et on examine certaines applications; et (iii) on calibre notre modèle et on le soumet à des simulations pour comparer ses propriétés avec celles obtenues au moyen du modèle statique standard.

Suggested Citation

  • María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 64-92, February.
  • Handle: RePEc:wly:canjec: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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