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Estimating Consistent Border Effects in Gravity Models with Multilateral Resistance
Author(s) -
Egger Peter H.,
Larch Mario
Publication year - 2012
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2012.01465.x
Subject(s) - unobservable , gravity model of trade , economics , gravity equation , bilateral trade , border effect , econometrics , physics , international economics , geography , archaeology , china
Abstract We suggest a modification of the Anderson and van Wincoop gravity model that relies on trade friction parameter estimates that are robust to the correlation of trade friction variables with any country‐specific unobservable variables. This leads to significantly different US–Canadian border effects as compared to the original approach.