A note on Bergstrand's 1985 gravity model

Nico Stoeckmann ()
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Nico Stoeckmann: Paderborn University

No 131, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: The outcome of Bergstrand's 1985 famous and widely cited gravity equation is corrected. Instead of resulting in PX_{ij} = (1/2) * Y_i^{1/2} * Y_j^{1/2}, the basic gravity model actually results in PX_{ij} = Y_i^{1/2} * Y_j^{1/2}. Even if his derivation is primarily used to find suitable control variables, Bergstrand also contributes a large amount to the theoretical justification of the model, which makes the correctness indispensable. The new solution leads to a better fit of his model in the set of other economists' approaches of the gravity model.

Keywords: International Economics; Trade; Gravity Model (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Pages: 3 pages
Date: 2020-04
New Economics Papers: this item is included in nep-int and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pdn:ciepap:131

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