IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/24772.html
   My bibliography  Save this paper

Gravity and Comparative Advantage: Estimation of Trade Elasticities for the Agricultural Sector

Author

Listed:
  • Kari E.R. Heerman
  • Ian M. Sheldon

Abstract

In this paper, a structural gravity model is presented which features intra-sector heterogeneity in agricultural productivity systematically linked to land and climate characteristics. The “systematic heterogeneity” (SH) gravity model predicts that countries with similar land and climate characteristics tend to specialize in the same agricultural products. Agricultural trade flow elasticities then depend on comparative advantage, with larger-magnitude trade flow responses predicted among countries more likely to specialize in similar agricultural products and thus compete head-to-head in foreign markets. This is in contrast to standard log-linear gravity models, which impose a restrictive pattern of trade flow elasticities that depend only on absolute advantage in the agricultural sector. We also show how the SH gravity model can accommodate product-specific trade costs. This allows the model to analyze changes in the dispersion of trade costs across products. Such analysis cannot be carried out in a standard gravity model, in which trade costs are assumed constant. Our results confirm economically and statistically significant heterogeneity in the effects of the variables that typically proxy for trade costs in gravity models and demonstrate that the SH gravity model is able to overcome the limitations imposed by the restrictive pattern of elasticities in a standard gravity model.

Suggested Citation

  • Kari E.R. Heerman & Ian M. Sheldon, 2018. "Gravity and Comparative Advantage: Estimation of Trade Elasticities for the Agricultural Sector," NBER Working Papers 24772, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24772
    Note: ITI
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w24772.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert Feenstra & Chang Hong, 2022. "China’s import demand for agricultural products: The impact of the Phase One trade agreement," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 345-368, February.
    2. Ian M. Sheldon, 2021. "Reflections on a Career as an Industrial Organization and International Economist," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 468-499, June.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:24772. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.