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Short Run Gravity

Author

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  • 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
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    Cited by:

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    5. James E. Anderson & Penglong Zhang, 2020. "Latent Exports: Almost Ideal Gravity and Zeros," NBER Working Papers 28278, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    trade elasticity puzzles; export dynamics; missing globalization;
    All these keywords.

    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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