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Short Run Gravity

Author

Listed:
  • James E. Anderson

    (Boston College)

  • Yoto Yotov

    (Drexel University, ERI-BAS, CESifo)

Abstract

Short run gravity is a geometric weighted average of long run gravity and bilateral capacity. The model features (i) joint trade costs endogenous to bilateral volumes, (ii) long run gravity as a limiting case of efficient investment in bilateral capacities, (iii) a structural ratio of short run to long run trade elasticities equal to a micro-founded buyers' incidence elasticity, and (iv) tractable short and long run models of the extensive margin. Application to manufacturing trade of 52 countries during the globalization period 1988-2006 strongly supports the model. Results solve several time invariance and trade elasticity puzzles in the literature.

Suggested Citation

  • James E. Anderson & Yoto Yotov, 2017. "Short Run Gravity," School of Economics Working Paper Series 2017-8, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2017_008
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    Cited by:

    1. Yilmazkuday, Hakan, 2019. "Estimating the trade elasticity over time," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    2. Amjad Masood & Junaid Ahmed & Inmaculada Martínez-Zarzoso, 2022. "Gravity of Covid-19," Economics Bulletin, AccessEcon, vol. 42(1), pages 60-68.
      • Masood, Amjad & Ahmed, Junaid & Martínez-Zarzoso, Inmaculada, 2021. "Gravity of Covid-19," MPRA Paper 109651, University Library of Munich, Germany.
    3. Giorgio Fagiolo & Tommaso Rughi, 2023. "Exploring the Macroeconomic Drivers of International Bilateral Remittance Flows: A Gravity-Model Approach," Economies, MDPI, vol. 11(7), pages 1-27, July.
    4. Frank, Jonas, 2018. "The effect of culture on trade over time: New evidence from the GLOBE data set," Hohenheim Discussion Papers in Business, Economics and Social Sciences 18-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    5. Luckstead, Jeff & Devadoss, Stephen, 2021. "The Effects of COVID-19-Induced Global Economic Recession on Processed Food Trade," 2021 Conference, August 17-31, 2021, Virtual 315856, International Association of Agricultural Economists.
    6. Raphaël Chiappini & Cyrielle Gaglio, 2024. "Digital intensity, trade costs and exports' quality upgrading," The World Economy, Wiley Blackwell, vol. 47(2), pages 709-747, February.
    7. James E. Anderson & Yoto V. Yotov, 2020. "Pound for Pound Export Diversification," CESifo Working Paper Series 8800, CESifo.
    8. Jia Chen Author-Name-First: Jia & Yongcheol Shin & Chaowen Zheng, 2023. "Dynamic Quantile Panel Data Models with Interactive Effects," Economics Discussion Papers em-dp2023-06, Department of Economics, University of Reading.
    9. Hoch, Felix & Rudsinske, Jonas, 2021. "Building bridges: Bilateral manager connections and international trade," CIW Discussion Papers 4/2021, University of Münster, Center for Interdisciplinary Economics (CIW).
    10. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    11. Yoto V. Yotov, 2022. "On the role of domestic trade flows for estimating the gravity model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 526-540, July.
    12. Fernandes,Ana Margarida & Lefebvre,Kevin Jean-Rene & Rocha,Nadia, 2021. "Heterogeneous Impacts of SPS and TBT Regulations : Firm-Level Evidence from Deep Trade Agreements," Policy Research Working Paper Series 9700, The World Bank.
    13. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
    14. Mariarosaria Comunale & Justas Dainauskas & Povilas Lastauskas, 2021. "What explains excess trade persistence? A theory of habits in the supply chains," CAMA Working Papers 2021-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    15. James E. Anderson & Penglong Zhang, 2025. "Latent Exports: Almost Ideal Gravity and Zeros," The Review of Economics and Statistics, MIT Press, vol. 107(1), pages 221-239, January.
    16. Thierry Mayer & Hillel Rapoport & Camilo Umana-Dajud, 2025. "Free Trade Agreements and the movement of business people," Journal of Economic Geography, Oxford University Press, vol. 25(1), pages 93-126.
    17. De Soyres,Francois Michel Marie Raphael & Maire,Julien Luc Yvon & Sublet,Guillaume, 2019. "An Empirical Investigation of Trade Diversion and Global Value Chains," Policy Research Working Paper Series 9089, The World Bank.
    18. Anna Golovko & Hasan Sahin, 2021. "Analysis of international trade integration of Eurasian countries: gravity model approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 519-548, September.
    19. Masood, Amjad, 2021. "Anatomy of the trade-effect of regional trade agreements and agenda for future research," MPRA Paper 108284, University Library of Munich, Germany.

    More about this item

    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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