The Gravity Equation in International Trade: An Explanation

Thomas Chaney

Journal of Political Economy, 2018, vol. 126, issue 1, 150 - 177

Abstract: The gravity equation in international trade states that bilateral exports are proportional to economic size and inversely proportional to geographic distance. While the role of size is well understood, that of distance remains mysterious. I offer an explanation for the role of distance: If (i) the distribution of firm sizes is Pareto, (ii) the average squared distance of a firm's exports is an increasing power function of its size, and (iii) a parameter restriction holds, then the distance elasticity of trade is constant for long distances. When the firm size distribution follows Zipf's law, trade is inversely proportional to distance.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (75)

Downloads: (external link)
http://dx.doi.org/10.1086/694292 (application/pdf)
http://dx.doi.org/10.1086/694292 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: The Gravity Equation in International Trade: an Explanation (2018)
Working Paper: The Gravity Equation in International Trade: an Explanation (2018)
Working Paper: The Gravity Equation in International Trade: An Explanation (2013)
Working Paper: The Gravity Equation in International Trade: An Explanation (2013)
Working Paper: The Gravity Equation in International Trade: An Explanation (2013)
Working Paper: The Gravity Equation in International Trade: An Explanation (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/694292

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division (pubtech@press.uchicago.edu).