Arbeitspapier
Gravity Models and the Law of Large Numbers
Modern quantitative theories of international trade rely on the probabilistic representation of technology and the assumption of the Law of Large Numbers (LLN), which ensures that when the number of traded goods goes to infinity, trade flows can be expressed via a deterministic gravity equation that is log-linear in exporter-specific, importer-specific and bilateral trade cost components. This paper shows that when the number of traded goods is finite, the gravity equation has a structural stochastic component not related to the fundamental gravity forces. It provides a novel explanation of the differences in the goodness of fit of gravity models across different sectors observed in the data. It also suggests that when the LLN does not hold, the welfare gains from trade have a considerable stochastic component and should be characterized via distributions rather than point estimates. We use sectoral trade data and Monte Carlo simulations to develop a procedure with minimal data requirements that allows estimation of intervals for the welfare gains from trade.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 8548
Trade: General
Economic Impacts of Globalization: General
Empirical Studies of Trade
Trade: Forecasting and Simulation
Law of Large Numbers
gains from trade
Nigai, Sergey K.
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:21 MESZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Jareb, Colin
- Nigai, Sergey K.
- Center for Economic Studies and Ifo Institute (CESifo)
Entstanden
- 2020
Ähnliche Objekte (12)
The correlation numbers in Minimal Liouville gravity
On the law of large numbers
The Random Conductance Model: local times large deviations, law of large numbers and effective conductance
GOCE gravity models and gravity gradient assessment
The love of large numbers revisited: A coherence model of the popularity bias
Laws of large numbers for mesoscopic stochastic models of reacting and diffusing particles
Some problems of large-scale gravity interpretation
Estimating the gravity model without gravity using panel data
Estimating the gravity model without gravity using panel data
Large deviations in physics : the legacy of the law of large numbers
Advanced methodologies for large-scale gravity field modelling
Gravity models in dynamic economies
The correlation numbers in Minimal Liouville gravity
On the law of large numbers
The Random Conductance Model: local times large deviations, law of large numbers and effective conductance
GOCE gravity models and gravity gradient assessment
The love of large numbers revisited: A coherence model of the popularity bias
Laws of large numbers for mesoscopic stochastic models of reacting and diffusing particles
Some problems of large-scale gravity interpretation
Estimating the gravity model without gravity using panel data
Estimating the gravity model without gravity using panel data
Large deviations in physics : the legacy of the law of large numbers
Advanced methodologies for large-scale gravity field modelling
Gravity models in dynamic economies
The correlation numbers in Minimal Liouville gravity
On the law of large numbers
The Random Conductance Model: local times large deviations, law of large numbers and effective conductance
GOCE gravity models and gravity gradient assessment
The love of large numbers revisited: A coherence model of the popularity bias
Laws of large numbers for mesoscopic stochastic models of reacting and diffusing particles
Some problems of large-scale gravity interpretation
Estimating the gravity model without gravity using panel data
Estimating the gravity model without gravity using panel data
Large deviations in physics : the legacy of the law of large numbers
Advanced methodologies for large-scale gravity field modelling