Zeros , Quality , and Space : Trade Theory and Trade Evidence

  title={Zeros , Quality , and Space : Trade Theory and Trade Evidence},
  author={Richard Baldwin and James Harrigan},
The gravity equation relates bilateral trade volumes to distance and country size. Countless gravity equations have been estimated, usually with “good” results, and trade theorists have proposed various theoretical explanations for gravity’s success. However, the many potential explanations for the success of the gravity equation make it a problematic tool for discriminating among trade models. As a matter of arithmetic, the value of trade depends on the number of goods traded, the amount of… CONTINUE READING
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