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Nonlinear Gravity

Author

Listed:
  • Pau Pujolas

    (McMaster University)

  • Wyatt Brooks

    (University of Notre Dame)

Abstract

In constant elasticity of substitution (CES) trade models, the elasticity of import intensity to trade costs is constant while in non-CES models, it is a function. We provide a general formula for this function without making functional form assumptions on the utility function and allowing for quite general production environments. We show how to use the formula to measure welfare gains and to compare them between CES and non-CES models. In a quantitative application we nd that more closed countries and countries with similar patterns of production and consumption across sectors have gains larger than those implied by CES models.

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  • Pau Pujolas & Wyatt Brooks, 2017. "Nonlinear Gravity," 2017 Meeting Papers 268, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:268
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    References listed on IDEAS

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    1. Wyatt J. Brooks & Pau S. Pujolas, 2018. "Capital accumulation and the welfare gains from trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(2), pages 491-523, August.

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