A Perfect Specialization Model for Gravity Equation in Bilateral Trade based on Production Structure

Majid Einian and Farshad Ravasan

MPRA Paper from University Library of Munich, Germany

Abstract: Specialization models are important in providing a solid theoretical ground for gravity equation in bilateral trade. Some research papers try to improve specialization models by adding imperfect specialization to them, but we believe it is unnecessary complication. We provide a perfect specialization model based on the phenomenon that we call tradability, which overcomes the problems with simpler models. We provide empirical evidence using estimations on panel data of bilateral trade of 40 countries over 10 years that support the theoretical model.

Keywords: bilateral trade; gravity equation; perfect specialization; tradability (search for similar items in EconPapers)
JEL-codes: C23 E23 F11 F14 (search for similar items in EconPapers)
Date: 2016-06-30
New Economics Papers: this item is included in nep-cse, nep-int and nep-mac
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Related works:
Working Paper: A Perfect Specialization Model for Gravity Equation in Bilateral Trade based on Production Structure (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72734

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