Gravity Redux: Structural Estimation of Gravity Equations with Asymmetric Bilateral Trade Costs ⁄

@inproceedings{Bergstrand2007GravityRS,
  title={Gravity Redux: Structural Estimation of Gravity Equations with Asymmetric Bilateral Trade Costs ⁄},
  author={Jeffrey H. Bergstrand and Peter H. Egger and Mario Larch},
  year={2007}
}
Theoretical foundations for estimating gravity equations were enhanced recently in Anderson and van Wincoop (2003). Though elegant, the model assumes symmetric bilateral trade costs to generate an estimable set of structural equations. In reality, however, trade costs (and trade ∞ows) are not bilaterally symmetric. To allow for asymmetric bilateral trade costs, we provide an alternative framework using the simple workhorse Krugman-type monopolistic-competition/increasing-returnsto-scale model… CONTINUE READING

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