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Melting constants in trade gravity’s rainbow

Sven Blank () and Peter Egger ()

Economics Letters, 2021, vol. 201, issue C

Abstract: Customary empirical gravity models are parametric and rely on the assumption that exports from country i to j depend on an additive index of three components: i-specific supply potential which is common across importers j; j-specific demand potential which is common across exporters i; and bilateral trade frictions which are indexed by ij and common within ij in a generic period. We demonstrate that the data reject the constancy of these components within category. The variation of trade-agreement-depth effects within category across country pairs and time is striking.

Keywords: Gravity model; Trade flows; Deep trade integration; Panel data; Non-parametric econometrics (search for similar items in EconPapers)
JEL-codes: C14 F14 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.econlet.2021.109803

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