International Trade Without CES: Estimating Translog Gravity

Dennis Novy

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country's imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted to be zero. I test the translog gravity equation and find strong empirical support in its favor.

Keywords: Translog; gravity; trade costs; distance; trade cost elasticity (search for similar items in EconPapers)
JEL-codes: F11 F12 F15 (search for similar items in EconPapers)
Date: 2010-12
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (14)

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https://cep.lse.ac.uk/pubs/download/dp1031.pdf (application/pdf)

Related works:
Journal Article: International trade without CES: Estimating translog gravity (2013)
Working Paper: International trade without CES: estimating translog gravity (2013)
Working Paper: International Trade without CES: Estimating Translog Gravity (2012)
Working Paper: International Trade without CES: Estimating Translog Gravity (2012)
Working Paper: International Trade without CES: Estimating Translog Gravity (2010)
Working Paper: International Trade without CES: Estimating Translog Gravity (2010)
Working Paper: International Trade without CES: Estimating Translog Gravity (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1031

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