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A note on Bergstrand's 1985 gravity model

Author

Listed:
  • Nico Stoeckmann

    (Paderborn University)

Abstract

The outcome of Bergstrand's 1985 famous and widely cited gravity equation is corrected. Instead of resulting in PX_{ij} = (1/2) * Y_i^{1/2} * Y_j^{1/2}, the basic gravity model actually results in PX_{ij} = Y_i^{1/2} * Y_j^{1/2}. Even if his derivation is primarily used to find suitable control variables, Bergstrand also contributes a large amount to the theoretical justification of the model, which makes the correctness indispensable. The new solution leads to a better fit of his model in the set of other economists' approaches of the gravity model.

Suggested Citation

  • Nico Stoeckmann, 2020. "A note on Bergstrand's 1985 gravity model," Working Papers CIE 131, Paderborn University, CIE Center for International Economics.
  • Handle: RePEc:pdn:ciepap:131
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    File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/ciepap/WP131.pdf
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    More about this item

    Keywords

    International Economics; Trade; Gravity Model;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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