If you need an accessible version of this item please contact JSTOR User Support

The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence

Jeffrey H. Bergstrand
The Review of Economics and Statistics
Vol. 67, No. 3 (Aug., 1985), pp. 474-481
Published by: MIT Press
DOI: 10.2307/1925976
Stable URL: http://www.jstor.org/stable/1925976
Page Count: 8
  • Download PDF
  • Cite this Item

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support
The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence
Preview not available

Abstract

Despite the gravity equations' empirical successes in "explaining" trade flows, the model's predictive potential has been inhibited by an absence of strong theoretical foundations. A general equilibrium world trade model is presented from which a gravity equation is derived by making certain assumptions, including perfect international product substitutability. If, however, trade flows are differentiated by origin as evidence suggests, the typical gravity equation is misspecified, omitting certain price variables. The last section presents empirical evidence supporting the notion that the gravity equation is a reduced form from a partial equilibrium subsystem of a general equilibrium model with nationally differentiated products.

Page Thumbnails

  • Thumbnail: Page 
474
    474
  • Thumbnail: Page 
475
    475
  • Thumbnail: Page 
476
    476
  • Thumbnail: Page 
477
    477
  • Thumbnail: Page 
478
    478
  • Thumbnail: Page 
479
    479
  • Thumbnail: Page 
480
    480
  • Thumbnail: Page 
481
    481