Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The gravity model of trade has been a workhorse empirical model for international trade economists since it was introduced by Jan Tinbergen in 1962. Though

The gravity model of trade has been a workhorse empirical model for international trade economists since it was introduced by Jan Tinbergen in 1962. Though the model was initially one only used in econometric estimation (that is, it was not theoretically motivated), the gravity model of trade has since been shown to result from a variety of different trade models.

a. (4 points) Give the generic equation for the gravity model of trade (note: do not assume the exponents on the variables are equal to one). State what each variable in the equation means and explain how the independent variables (the variables on the right hand side of the equation) can help explain trade flows.

b. (2 points) Explain how the gravity model of trade can be used to spot anomalies in trade patterns.

c. (4 points) State the econometric specification of the gravity model of trade that McCallum used to estimate the border effect between the United States and Canada. Explain how the variable works.

d. (3 points) Show that McCallum's specification in part c is a log-log specification of the gravity model of trade (with the caveat that McCallum added the variable as an explanatory variable to the more generic gravity model specification given in part a).

e. (2 points) Explain other variables (besides those already in the gravity model of trade) that you believe can help explain trade patterns. How would you include those in a specification similar to McCallum?

https://www-jstor-org.ezproxy.library.wwu.edu/stable/pdf/2118191.pdf?refreqid=excelsior%3A15b831144614dbc0a4c2b77900c8a504

I want to you can reading "National Borders Matter: Canada-U.S. Regional Trade Patterns" by John McCallum, and answer the question for each one, that I can know the a, b, c, d, e

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quality Of The Environment An Economic Approach To Some Problems In Using Land, Water, And Air

Authors: Orris C Herfindahl, Allen V Kneese

1st Edition

1317386663, 9781317386667

More Books

Students also viewed these Economics questions