Nonlinear Gravity

Pau Pujolas and Wyatt Brooks ()

No 268, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: In constant elasticity of substitution (CES) trade models, the elasticity of import intensity to trade costs is constant while in non-CES models, it is a function. We provide a general formula for this function without making functional form assumptions on the utility function and allowing for quite general production environments. We show how to use the formula to measure welfare gains and to compare them between CES and non-CES models. In a quantitative application we nd that more closed countries and countries with similar patterns of production and consumption across sectors have gains larger than those implied by CES models.

Date: 2017
New Economics Papers: this item is included in nep-int and nep-upt
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Citations: View citations in EconPapers (1)

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Working Paper: Nonlinear Gravity (2014)
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