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International trade and monopolistic competition without CES : estimating translog gravity
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Novy, Dennis (2010) International trade and monopolistic competition without CES : estimating translog gravity. Working Paper. Coventry: University of Warwick. Dept. of Economics. Warwick economics research paper series (TWERPS), Vol.2010 (No.929).
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Abstract
This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and rich substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country?s imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted to be zero. I test the translog gravity equation and find strong empirical support in its favor. In an application to the currency union effect, I find that a currency union is only associated with substantially higher bilateral trade if the exporting country provides a small share of the destination country's imports. For other pairs, the currency union effect is modest or indistinguishable from zero.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HF Commerce | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | International trade -- Econometric models, Production functions (Economic theory), Monopolistic competition | ||||
Series Name: | Warwick economics research paper series (TWERPS) | ||||
Publisher: | University of Warwick. Dept. of Economics | ||||
Place of Publication: | Coventry | ||||
Official Date: | 2010 | ||||
Dates: |
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Volume: | Vol.2010 | ||||
Number: | No.929 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Economic and Social Research Council (Great Britain) (ESRC) | ||||
Grant number: | RES-000-22-3112 (ESRC) | ||||
Version or Related Resource: | Novy, Dennis. (2012) International trade without CES : estimating translog gravity. Working Paper. Coventry, UK: Department of Economics, University of Warwick. (CAGE Online Working Paper Series, No.101/2012). http://wrap.warwick.ac.uk/id/eprint/57898 Novy, D. (2010). International trade without CES : estimating translog gravity. Working Paper. Coventry: Department of Economics, University of Warwick. (CAGE Online Working Paper Series, No.31). http://wrap.warwick.ac.uk/id/eprint/57575 Novy, D. (2010). International trade and monopolistic competition without CES : estimating translog gravity. Coventry: Department of Economics, University of Warwick. (The Warwick Economics Research Paper Series no. 929). http://wrap.warwick.ac.uk/id/eprint/3531 Novy, Dennis. (2013) International trade without CES : estimating translog gravity. Journal of International Economics, 89 (2). pp. 271-282. ISSN 0022-1996 http://wrap.warwick.ac.uk/id/eprint/50192 Novy, Dennis (2011). International trade and monopolistic competition without CES : estimating translog gravity. Invited Speaker : Why Open Regionalism Is Not Always Good. The Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham, 31 Jan 2011. http://wrap.warwick.ac.uk/id/eprint/44990 | ||||
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