Novy, Dennis (2013) International trade without CES: estimating translog gravity. Journal of International Economics, 89 (2). pp. 271-282. ISSN 0022-1996
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Abstract
This paper derives a micro-founded gravity equation based on a translog demand system that allows for flexible substitution patterns across goods. In contrast to the standard CES-based gravity equation, translog gravity generates an endogenous trade cost elasticity. Trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country's imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted to be zero. I test the translog gravity equation and find empirical evidence that is in many ways consistent with its predictions.
Item Type: | Article |
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Official URL: | http://www.journals.elsevier.com/journal-of-intern... |
Additional Information: | © 2013 Elsevier B.V. |
Divisions: | Centre for Economic Performance |
Subjects: | H Social Sciences > HC Economic History and Conditions |
JEL classification: | F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies F - International Economics > F1 - Trade > F15 - Economic Integration |
Date Deposited: | 01 Jul 2014 14:50 |
Last Modified: | 13 Aug 2024 23:14 |
Projects: | RES-000-22-3112 |
Funders: | Economic and Social Research Council |
URI: | http://eprints.lse.ac.uk/id/eprint/57367 |
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