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Gold Standard Gravity

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  • James E. Anderson
  • Yoto V. Yotov

Abstract

This paper provides striking confirmation of the restrictions of the structural gravity model of trade. Structural forces predicted by theory explain 95% of the variation of the fixed effects used to control for them in the recent gravity literature, fixed effects that in principle could reflect other forces. This validation opens avenues to inferring unobserved sectoral activity and multilateral resistance variables by equating fixed effects with structural gravity counterparts. Our findings also provide important validation of a host of general equilibrium comparative static exercises based on the structural gravity model.

Suggested Citation

  • James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," NBER Working Papers 17835, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17835
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    References listed on IDEAS

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    1. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    2. James E. Anderson & Yoto V. Yotov, 2010. "Specialization: Pro- and Anti-globalizing, 1990-2002," NBER Working Papers 16301, National Bureau of Economic Research, Inc.
    3. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
    4. Mayer, Thierry & Paillacar, Rodrigo & Zignago, Soledad, 2008. "TradeProd. The CEPII Trade, Production and Bilateral Protection Database: Explanatory Notes," MPRA Paper 26477, University Library of Munich, Germany.
    5. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
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    JEL classification:

    • F1 - International Economics - - Trade

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