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Extended Gravity

Author

Listed:
  • Gloria Sheu

    (US Department of Justice)

  • Andres Zahler

    (Diego Portales University)

  • Eduardo Morales

    (Princeton University)

Abstract

Exporting firms often enter foreign markets that are similar to previous export destinations. We develop a dynamic model in which a firm’s exports in each market may depend on how similar it is to its home country (gravity) and to its previous export destinations (extended gravity). Given the large number of export paths from which forward-looking firms may choose, we use a moment inequality approach to structurally estimate our model. We conclude that extended gravity reduces firms’ cost of foreign market entry by 27% to 40%.

Suggested Citation

  • Gloria Sheu & Andres Zahler & Eduardo Morales, 2016. "Extended Gravity," 2016 Meeting Papers 1565, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:1565
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    File URL: https://economicdynamics.org/meetpapers/2016/paper_1565.pdf
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    References listed on IDEAS

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    Cited by:

    1. James E. Anderson & Mario Larch & Yoto V. Yotov, 2015. "Growth and Trade with Frictions: A Structural Estimation Framework," CESifo Working Paper Series 5446, CESifo Group Munich.
    2. Ho, Katherine & Rosen, Adam M., 2015. "Partial Identification in Applied Research: Benefits and Challenges," CEPR Discussion Papers 10883, C.E.P.R. Discussion Papers.
    3. Gumpert, Anna & Moxnes, Andreas & Ramondo, Natalia & Tintelnot, Felix, 2017. "The Life-Cycle Dynamics of Exporters and Multinational Firms," Rationality and Competition Discussion Paper Series 55, CRC TRR 190 Rationality and Competition.
    4. Thomas Chaney, 2014. "The Network Structure of International Trade," American Economic Review, American Economic Association, pages 3600-3634.
    5. David de la Croix & Faustine Perrin, 2016. "French Fertility and Education Transition: Rational Choice vs. Cultural Diffusion," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2016007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Federico Ciliberto & Ina C. Jäkel, 2017. "Exporter Price Premia?," Economics Working Papers 2017-09, Department of Economics and Business Economics, Aarhus University.
    7. A. Kerem Cosar & Paul L. E. Grieco & Felix Tintelnot, 2015. "Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry," The Review of Economics and Statistics, MIT Press, pages 623-637.
    8. N. Berman & V. Rebeyrol & V. Vicard, 2015. "Demand learning and firm dynamics: evidence from exporters," Working papers 551, Banque de France.
    9. A. Kerem Cosar & Paul L. E. Grieco & Felix Tintelnot, 2015. "Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry," The Review of Economics and Statistics, MIT Press, pages 623-637.
    10. Cheng, Dong & Tan, Yong & Yu, Jian, 2017. "Credit Rationing and Firm Exports: Micro Evidence from SMEs in China," MPRA Paper 81914, University Library of Munich, Germany.
    11. Heiland, Inga, 2016. "Global Risk Sharing Through Trade in Goods and Assets: Theory and Evidence," Annual Conference 2016 (Augsburg): Demographic Change 145821, Verein für Socialpolitik / German Economic Association.
    12. Andrew Chesher & Adam Rosen, 2015. "Characterizations of identified sets delivered by structural econometric models," CeMMAP working papers CWP63/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    13. Donald R. Davis & Jonathan I. Dingel & Joan Monras & Eduardo Morales, 2017. "How Segregated is Urban Consumption?," NBER Working Papers 23822, National Bureau of Economic Research, Inc.

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