Theory and Practice of International Trade Linkage Models

A Simultaneous‐Equations Model of Trade, Conflict, and Cooperation

“…PS K and PT J are approximately measured by multilateral import and export price indices, respectively, and hence RM K and RX J are multilateral imports and exports in real terms (e.g., see Geraci and Preow, 1982;Bergstrand, 1985;Italianer, 1986). Equation (10) extends Bergstrand (1985) to include conflict and cooperation as viewed by each country and by using multilateral import and export flows instead of gross domestic product.…”

“…In our model, Bergstrand's (1985) one-stage decision-making process is replaced by a two-stage decision-making process as in Geraci and Preow (1982), Italianer (1986), Italianer and d'Alcantara (1986), and others. 5 In the first stage, consumers choose between foreign and domestic goods.…”

“…6. The CES form is used in many bilateral trade studies Geraci and Preow, 1982;Bergstrand, 1985;Italianer, 1986). For s K = 1, the CES function becomes a Cobb-Douglas function.…”

“…In order to make the model linear, trade terms in (15) are replaced by their log terms. Second, the price terms of PT J and PS K are approximated by multilateral trade unit value indices, as in Bergstrand (1985), Italianer (1986), and others. Since tariff, exchange rate, and transportation cost enter the model as a single variable (ETC), their parameters are naturally restricted to be identical in the estimation.…”

Henri Theil’s Contributions to Economics and Econometrics

“…Hence, in order to compare alternative measures of policy, he should be able to say whether a probability distribution A is preferable to a distribution B, or vice versa, or whether he considers them as equally valuable. 9 We therefore introduce: s Their approach may be 7 Sometimes there will be a multiple solution, but this is not essential.…”