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Cited by 349

The DOI matches its Crossref record; 43 of the 43 references it cites were found in a registry or an index.

Nonhomotheticity and Bilateral Trade: Evidence and a Quantitative Explanation

·2011·Econometrica
DOI 10.3982/ecta8346
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Abstract

The standard gravity model predicts that trade flows increase in proportion to importer and exporter total income, regardless of how income is divided into income per capita and population. Bilateral trade data, however, show that trade grows strongly with income per capita and is largely unresponsive to population. I develop a general equilibrium Ricardian model of trade that allows the elasticity of trade with respect to income per capita and with respect to population to diverge. Goods are of various types, which differ in their income elasticity of demand and in the extent to which there is heterogeneity in their production technologies. I estimate the model using bilateral trade data of 162 countries and compare it to a special case that delivers the gravity equation. The general model improves the restricted model's predictions regarding variations in trade due to size and income. I experiment with counterfactuals. A positive technology shock in China makes poor and rich countries better off and middle-income countries worse off.

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Metadata

Venue
Econometrica
Publisher
The Econometric Society
Published
2011
Volume
79
Issue
4
Pages
1069-1101
ISSN
0012-9682 (ISSN-L)
DOI
10.3982/ecta8346
OpenAlex
W1530682943
Cited by
349
References
43
FWCI
80.87
Type
journal article
Language
en
Open access
closed

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