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Gravity, Productivity and the Pattern of Production and Trade

  • James E. Anderson

The effects of geography and productivity on the global pattern of production are captured here in a specific factors gravity model. Simple enough for sharp results, the model is yet rich enough to contain the high dimensional productivity frictions in production and distribution of a many country world. The starting point is the international incidence of productivity frictions inferred from gravity. Sellers' and buyers' incidence both reduce real income. Sellers' incidence shocks reduce sectoral skill premia. Bigger sellers' incidence by country (sector) reduces equilibrium shares of world (national) GDP. In contrast to the generalized Ricardian gravity model of Eaton and Kortum (2002), relative factor endowments play a role and import-competing production and wage premia in exporting are featured.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14642.

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Date of creation: Jan 2009
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Handle: RePEc:nbr:nberwo:14642
Note: ITI
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  1. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," Boston College Working Papers in Economics 698, Boston College Department of Economics.
  2. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  3. James E. Anderson, 2008. "Globalization and Income Distribution: A Specific Factors Continuum Approach," Boston College Working Papers in Economics 699, Boston College Department of Economics.
  4. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
  5. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  6. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  7. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  8. Helpman, Elhanan & Razin, Assaf, 1978. "A theory of international trade under uncertainty," MPRA Paper 22112, University Library of Munich, Germany.
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