Monthly Archives: March 2015

GRAVITY WITH GRAVITAS: Regulatory costs

We assume that the trade costs are borne by the exporter. We have in mind information costs, design costs and various legal and regulatory costs as well as transport costs. The new empirical literature on the export behavior of firms … Continue reading

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GRAVITY WITH GRAVITAS: The Gravity Model

The empirical literature cited above pays no more than lip service to theoretical justification. We show in this section how taking the theory seriously provides a different model to estimate with a much more useful interpretation. Anderson [1979] presented a … Continue reading

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GRAVITY WITH GRAVITAS: Effect of the border

Border — Canada is the exponential of the Canadian dummy variable coefficient, a5, which gives us the effect of the border on the ratio of inter-provincial trade to state-province trade after controlling for distance and size. Similarly, Border — US … Continue reading

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GRAVITY WITH GRAVITAS: The McCallum Gravity Equation

McCallum [1995] estimated the following equation: Here %ij is exports from region i to region j, + and +j are gross domestic production in regions i and j, is the distance between regions i and j, and By is a … Continue reading

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