Latent Exports: Almost Ideal Gravity and Zeros

James Anderson and Penglong Zhang

No 1020, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Almost Ideal gravity associates zero trade flows with variable and fixed trade cost variation in a flexible demand system. Latent trade shares between non-partners are inferred from the Tobit estimator applied to trade among 75 countries and 25 sectors in 2006. Latent Trade Bias (LTB) is the difference between the latent trade share and the as-if-frictionless trade share. Explained LTB variance decomposition shows 52% due to variation of variable trade cost, 24% due to non-homothetic income effects, and 24% due to fixed trade cost effects. Counterfactual variable (fixed) cost reductions suggest cases of successful export promotion between non-partners.

Keywords: Zero flows; variable cost; fixed cost; latent trade (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 (search for similar items in EconPapers)
Date: 2020-12-15
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Latent Exports: Almost Ideal Gravity and Zeros (2025)
Working Paper: Latent Exports: Almost Ideal Gravity and Zeros (2020)
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