Short Run Gravity

James Anderson and Yoto Yotov

No 23458, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F10 F14 F15 (search for similar items in EconPapers)
Date: 2017-05
New Economics Papers: this item is included in nep-dcm and nep-int
Note: ITI
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Citations: View citations in EconPapers (3)

Published as James E. Anderson & Yoto V. Yotov, 2020. "Short run gravity," Journal of International Economics, vol 126.

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Journal Article: Short run gravity (2020)
Working Paper: Short Run Gravity (2017)
Working Paper: Short Run Gravity (2017)
Working Paper: Short Run Gravity (2017)
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