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  • Authors: James E. Anderson (1979)

  • Probably the most successful empirical trade device of the last twenty-five years is the gravity equation. Applied to a wide variety of goods and factors moving over regional and national borders under dif fering circumstances, it usually produces a good fit

  • Bài báo/Newspaper


  • Authors: James E. Anderson (1979)

  • Probably the most successful empirical trade device of the last twenty-five years is the gravity equation. Applied to a wide variety of goods and factors moving over regional and national borders under dif fering circumstances, it usually produces a good fit. Unfortunately, as is widely recog nized, its use for policy is severely ham pered by its "unidentified" properties. Insertion into the equation of policy in struments such as border taxes has no theoretical justification; and inference about the effect of taxes from examining changes in the equation over times when taxes have changed carries no guarantee of validity

  • Bài báo/Newspaper


  • Authors: James E. Anderson (1979)

  • The intent of this paper is to provide a theoretical explanation for the gravity equation applied to commodities. It uses the properties of expenditure systems with a maintained hypothesis of identical homo thetic preferences across regions. Products are differentiated by place of origin (for a justification, see Peter Isard). The gravity model constrains the pure expenditure sys tem by specifying that the share of na tional expenditure accounted for by spend ing on tradeables (openness to trade) is a stable unidentified reduced-form function of income and population.