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Short Run Gravity

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  • James E. Anderson

    (Boston College)

  • Yoto V. Yotov

    (Drexel University)

Abstract

Short run gravity is a geometric weighted average of long run gravity and bilateral capacity. The model features (i) joint trade costs endogenous to bilateral volumes, (ii) long run gravity as a limiting case of efficient investment in bilateral capacities, (iii) a structural ratio of short run to long run trade elasticities equal to a microfounded buyers' incidence elasticity, and (iv) tractable short and long run models of the extensive margin. Application to manufacturing trade of 52 countries during the globalization period 1988-2006 strongly supports the model. Results solve several time invariance and trade elasticity puzzles in the literature.

Suggested Citation

  • James E. Anderson & Yoto V. Yotov, 2017. "Short Run Gravity," Boston College Working Papers in Economics 928, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:928
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    Cited by:

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    3. James E. Anderson & Yoto V. Yotov, 2020. "Pound for Pound Export Diversification," CESifo Working Paper Series 8800, CESifo.
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    5. Povilas Lastauskas & Mariarosaria Comunale & Justas Dainauskas, 2021. "What Explains Excess Trade Persistence? A Theory of Habits in the Supply Chains," Bank of Lithuania Working Paper Series 85, Bank of Lithuania.
    6. Frank, Jonas, 2018. "The effect of culture on trade over time: New evidence from the GLOBE data set," Hohenheim Discussion Papers in Business, Economics and Social Sciences 18-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    7. James E. Anderson & Penglong Zhang, 2020. "Latent Exports: Almost Ideal Gravity and Zeros," Boston College Working Papers in Economics 1020, Boston College Department of Economics.

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    More about this item

    Keywords

    trade elasticity puzzles; export dynamics; missing globalization.;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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