Journal article
Gravity with scale effects
Journal of international economics, v 100, pp 174-193
May 2016
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This paper extends the structural gravity model to incorporate scale effects and exchange rate passthrough. Bilateral scale effects in cross-border trade are inferred from the difference in distance elasticities between cross border and inter-provincial bilateral trade in a majority of 28 goods and services sectors for Canada's provinces. Bilateral-specific relationship investment is a possible explanation. Incomplete passthrough of large exchange rate changes from 1997 to 2007, amplified by scale effects, produces direct effects on bilateral trade for 12 of 19 goods sectors but none of 9 services sectors.
•We extend structural gravity to capture scale effects.•We allow for incomplete exchange rate passthrough in the model.•We infer significant scale economies in Canada-US cross-border trade, 1997-2007.•More than half of goods and services sectors have such scale economies.•We infer incomplete and non-uniform exchange rate passthrough.
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Details
- Title
- Gravity with scale effects
- Creators
- James E. Anderson - Boston CollegeMykyta Vesselovsky - Global Affairs CanadaYoto V. Yotov - Bulgarian Academy of Sciences
- Publication Details
- Journal of international economics, v 100, pp 174-193
- Publisher
- Elsevier
- Grant note
- Department of Foreign Affairs, Trade and Development, Canada. All errors are our own. An earlier version circulated as “Gravity, Scale and Exchange Rates”, NBER WP No. 18807.
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000377317100012
- Scopus ID
- 2-s2.0-84962856864
- Other Identifier
- 991019167641104721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics