International trade without CES: estimating translog gravity

Dennis Novy

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
JEL-codes: F11 F12 F15 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (144)

Published in Journal of International Economics, March, 2013, 89(2), pp. 271-282. ISSN: 0022-1996

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http://eprints.lse.ac.uk/57367/ Open access version. (application/pdf)

Related works:
Journal Article: 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)
Working Paper: International Trade without CES: Estimating Translog Gravity (2010)
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