Costas Arkolakis () and
Journal of Political Economy, 2020, vol. 128, issue 2, 393 - 433
We study the theoretical properties and counterfactual predictions of a large class of general equilibrium trade and economic geography models. By combining aggregate factor supply and demand functions with market-clearing conditions, we prove that existence, uniqueness, and—given observed trade flows—the counterfactual predictions of any model within this class depend only on the demand and supply elasticities (“gravity constants”). Using a new “model-implied” instrumental variables approach, we estimate these gravity constants and use these estimates to compute the impact of a trade war between the United States and China.
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Working Paper: Universal Gravity (2015)
Working Paper: Universal Gravity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/704385
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