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Short Run Gravity

Author

Listed:
  • Anderson, James E.

    () (Boston College)

  • Yotov, Yoto

    () (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

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

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    References listed on IDEAS

    as
    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. Christian Broda & Joshua Greenfield & David Weinstein, 2006. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," NBER Working Papers 12512, National Bureau of Economic Research, Inc.
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    5. Zimmermann, Christian, 1997. "International real business cycles among heterogeneous countries," European Economic Review, Elsevier, vol. 41(2), pages 319-356, February.
    6. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
    7. Mion, Giordano & Opromolla, Luca David, 2014. "Managers' mobility, trade performance, and wages," Journal of International Economics, Elsevier, vol. 94(1), pages 85-101.
    8. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
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    12. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-153, February.
    13. Scott L. Baier & Yoto V. Yotov & Thomas Zylkin, 2016. "On the Widely Differing Effects of Free Trade Agreements: Lessons from Twenty Years of Trade Integration," CESifo Working Paper Series 6174, CESifo Group Munich.
    14. James E. Anderson & Yoto V. Yotov, 2010. "Specialization: Pro- and Anti-globalizing, 1990-2002," NBER Working Papers 16301, National Bureau of Economic Research, Inc.
    15. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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    17. Delina E. Agnosteva & James E. Anderson & Yoto V. Yotov, 2014. "Intra-national Trade Costs: Measurement and Aggregation," NBER Working Papers 19872, National Bureau of Economic Research, Inc.
    18. Crucini, Mario J. & Davis, J. Scott, 2016. "Distribution capital and the short- and long-run import demand elasticity," Journal of International Economics, Elsevier, vol. 100(C), pages 203-219.
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    More about this item

    Keywords

    trade elasticity puzzles; export dynamics; missing globalization;

    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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