International Trade without CES: Estimating Translog Gravity

Dennis Novy

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: This paper derives a micro-founded gravity equation based on a translog demand system that allows for flexible substitution patterns across goods. In contrast to the standard CES-based gravity equation, translog gravity generates an endogenous trade cost elasticity. 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 empirical evidence that is in many ways consistent with its predictions.

Keywords: Translog; Gravity; Trade Costs; Distance; Trade Cost Elasticity; Import Share (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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http://www2.warwick.ac.uk/fac/soc/economics/resear ... ns/101.2012_novy.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 (2010)
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:cge:wacage:101

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