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Preprint
Gravity at Sixty: The Workhorse Model of Trade
SSRN Electronic Journal, (9584)
2022
Abstract
On the eve of its 60th anniversary, the gravity model of trade is a ‘celebrity’, due to its intuitive appeal, solid theoretical foundations, and remarkable empirical success. Yet, many economists still view gravity simply as an intuitive but naive reduced-form estimating equation and apply it without guidance from theory, while others are skeptical about its usefulness for counterfactual projections. The objective of this paper is to offer a historical overview of its evolution from an a-theoretical application to an estimating computable general equilibrium (E-CGE) model, which can be nested in more complex frameworks. Along the way, I address some misconceptions about the gravity model, summarize the current best practices for gravity estimations, and highlight some properties that have made gravity so successful
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Details
- Title
- Gravity at Sixty
- Creators
- Yoto V Yotov - Drexel University
- Publication Details
- SSRN Electronic Journal, (9584)
- Series
- CESifo Working Paper
- Publisher
- SSRN
- Resource Type
- Preprint
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Other Identifier
- 991021807010904721