@techreport{Novy2010International,
abstract = {This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and rich substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the exporting country only provides a small share of the destination country's imports. As a result, trade costs have a heterogeneous impact across country pairs, with some trade flows predicted to be zero. I test the translog gravity equation and find strong empirical support in its favor. In an application to the currency union effect, I find that a currency union is only associated with substantially higher bilateral trade if the exporting country provides a small share of the destination country's imports. For other pairs, the currency union effect is modest or indistinguishable from zero.},
address = {M\"{u}nchen},
author = {Dennis Novy},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {F11; F12; F15; 330; translog; trade costs; gravity; currency union; monopolistic competition; trade cost elasticity; heterogeneity; zero trade; Au\ss{}enwirtschaft; Kosten; Gravitationsmodell; Mikro\"{o}konomische Fundierung; Monopolistischer Wettbewerb; Allgemeines Gleichgewicht; W\"{a}hrungsunion; Sch\"{a}tzung; OECD-Staaten},
language = {eng},
number = {3008},
publisher = {CESifo},
title = {International trade and monopolistic competition without CES: Estimating translog gravity},
type = {CESifo working paper Trade Policy},
url = {http://hdl.handle.net/10419/38920},
year = {2010}
}
