Unlocking New Methods to Estimate Country‐Specific Effects and Trade Elasticities With the Structural Gravity Model
ABSTRACT We propose new methods to identify the impact of country‐specific characteristics, policies, and trade costs on bilateral trade flows within the structural gravity framework. We complement theory with a simple two‐stage estimating procedure and offer proof of concept by quantifying the impact of country‐specific research and development (R&D) expenditure on trade. Our results suggest a positive relationship overall but a larger impact of R&D on international (versus domestic) trade. Importantly, our methods deliver trade elasticity estimates without the need for price or tariff data, and we highlight this feature by obtaining aggregate and sectoral trade elasticity estimates, including for services.
Authors
- Angelos Theodorakopoulos (ORCID: https://orcid.org/0000-0003-4151-4887)
- Rebecca Freeman (ORCID: https://orcid.org/0000-0002-4773-2263)
- Yoto V. Yotov (ORCID: https://orcid.org/0000-0001-6986-2627)
- Mario Larch (ORCID: https://orcid.org/0000-0001-9355-2004)
Institutions
- HOGENT University of Applied Sciences and Arts (BE)
- Austrian Institute of Economic Research (AT)
- Ifo Institute for Economic Research (DE)
- Aston University (GB)
- Centre d'Etudes Prospectives et d'Informations Internationales (FR)
- Ghent University (BE)
- Policy Analysis (United States) (US)
- Bank of England (GB)
- University of Bayreuth (DE)
- Drexel University (US)
- London School of Economics and Political Science (GB)
Publication Details
- Journal
- Journal of Applied Econometrics
- Published
- 2025-05-20
- DOI
- https://doi.org/10.1002/jae.3133
- Citations
- 5
- Primary Topic
- Global trade and economics
- Type
- article
- Field-Weighted Citation Impact
- 15.43