Gravity for Dummies and Dummies for Gravity Equations

Richard Baldwin and Daria Taglioni ()

No 5850, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper provides a minimalist derivation of the gravity equation and uses it to identify three common errors in the literature, what we call the gold, silver and bronze medal errors. The paper provides estimates of the size of the biases taking the currency union trade effect as an example. We generalize Anderson-Van Wincoop?s multilateral trade resistance factor (which only works with cross section data) to allow for panel data and then show that it can be dealt with using time-varying country dummies with omitted determinants of bilateral trade being dealt with by time-invariant pair dummies.

Keywords: Country dummies; Gravity equation; Pair dummies (search for similar items in EconPapers)
JEL-codes: F10 F33 F4 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (818)

Downloads: (external link)
https://cepr.org/publications/DP5850 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Gravity for Dummies and Dummies for Gravity Equations (2006)
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:cpr:ceprdp:5850

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5850

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().