Gravity with Gravitas: A Solution to the Border Puzzle

Anderson, James E.; Wincoop, Eric van

doi:10.1257/000282803321455214

Cited by 5,453 publications

(5,508 citation statements)

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“…Using homothetic budget shares and general equilibrium market clearing under fairly general conditions, one can derive a structural basis for (1) (Costinot and Rodríguez-Clare 2014). Following the model of Anderson and van Wincoop (2003) for instance:…”

Section: The General Gravity Equationmentioning

confidence: 99%

“…Some authors (Frankel and Wei 1993;Frankel 1997b;Anderson and van Wincoop 2003) have proposed using the NLS method in estimating the gravity equation: this function gives more weight to observations where exp(Xb ) is large, so that countries with larger S i and M j for instance, get more weight. There is economic intuition for this weighting scheme, as countries with higher GDP tend to report more accurately and therefore get more weight in estimating the model.…”

Section: Non-linear Least Squaresmentioning

confidence: 99%

“…Anderson and van Wincoop (2003) show that the inclusion of the multilateral resistance term considerably reduces McCallum's ratio of inter-provincial trade to province-state trade from 16.4 to 10.7. Additionally, they find that borders reduce trade between the US and Canada by 44% and among other industrialized countries by 29%.…”

mentioning

confidence: 93%

“…These findings, and in particular the findings of McCallum (1995), were revisited by Anderson and van Wincoop (2003) who show that the large border effects mainly come from omitting a multilateral resistance term in McCallum's specification. Anderson and van Wincoop (2003) show that the inclusion of the multilateral resistance term considerably reduces McCallum's ratio of inter-provincial trade to province-state trade from 16.4 to 10.7.…”

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confidence: 98%

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Distance and Border Effects in International Trade: A Comparison of Estimation Methods

2016

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This paper compares various estimation methods often used in the estimation of gravity models of international trade. The authors first discuss different structural and consistent estimation techniques, their underlying assumptions and their impact on estimated coefficients. They then estimate the gravity model for global bilateral trade flows using various empirical methodologies. They focus on a comparison of the distance and border effects across estimation techniques. For the border effects they take into account adjacency effects as well as the distinction between intra-regional and inter-regional trade. Their findings confirm the significantly negative distance and the significantly positive adjacency effect across estimation methods, although the size of the effects varies substantially across methods. The border effects by global regions are much more sensitive -both in size and direction -to the applied estimation method. Although all estimation methods have their own merits and drawbacks, the authors provide some guidelines for future empirical research based on their findings.

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Section: The General Gravity Equationmentioning

confidence: 99%

Section: Non-linear Least Squaresmentioning

confidence: 99%

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confidence: 93%

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confidence: 98%

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Distance and Border Effects in International Trade: A Comparison of Estimation Methods

2016

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“…This dummy clarifies the effective distance among two countries (i and j) which may engage in large volumes of border trade (McCallum, 1995;Anderson & Wincoop, 2003). The dummy variable for Border is unity if countries i and j share a common border and 0 when they do not.…”

Section: The Empirical Modelmentioning

confidence: 99%

The Effect of Regionalism and Infrastructure on Bilateral Trade: An Augmented Gravity Analysis for ASEAN

Saputra¹

2014

IJEF

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This paper estimates the effects of regionalism in South East Asia (AFTA), infrastructure, economic size, distance, and common border on the ASEAN trade flows. The trade flow evolutions of 97 ASEAN's partner during 1990-2000 are considered in the analysis through the utilization of cross-sectional and panel gravity model. The results show that as a symbol of regionalism in ASEAN, the coefficient of AFTA and infrastructure are positively significant in affecting the ASEAN trade flows for most periods. The other determinants, i.e. economic size (income), and distance affect significantly the ASEAN trade flows. However, common border is found to have no effect on ASEAN trade.

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Trade and Informal Institutions

Anderson¹

Handbook of International Trade, Volume II

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This chapter surveys recent work on informal institutions and trade. Trade barriers other than tariffs, quotas and transport costs are apparently very large even between developed countries such as the US and Canada. Nations exhibit wide variation in their use of informal institutions in trade, suggesting complex relations between formal and informal institutions and the volume of trade. New institutional economic research on informal institutions and trade attempts to explain these phenomena. The institutions presumptively lower trade costs but impose costs of their own. Informal institutions presumptively substitute for but may complement formal institutions. Better institutions are not always in every trader s interest. 1 2 1 2A narrow de nition of economists is used here for simple classi cation purposes. The old institutional economics which ourished in the interwar period in the US eschewed formal models, but it certainly used economic reasoning, regarded itself as scienti c and would be astonished at exclusion from the set of economists.This essay is not the place for a philosophical discussion of the mathematical economics strategy. Pragmatically, among the set of economists who run the major PhD programs and the most prestigious journals, the folk wisdom is that it takes a model to beat a model .

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Gravity with Gravitas: A Solution to the Border Puzzle

Cited by 5,453 publications

References 11 publications

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

The Effect of Regionalism and Infrastructure on Bilateral Trade: An Augmented Gravity Analysis for ASEAN

Trade and Informal Institutions

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