Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174124
Authors: 
Minford, Patrick
Xu, Yongdeng
Year of Publication: 
2017
Series/Report no.: 
Cardiff Economics Working Papers E2017/10
Abstract: 
We examine the empirical evidence bearing on whether UK trade is governed by a Classical model or by a Gravity model, using annual data from 1965 to 2015 and the method of Indirect Inference which has very large power in this application. The Gravity model here differs from the Classical model in assuming imperfect competition and a positive effect of total trade on productivity. We found that the Classical model passed the test rather easily, and that the Gravity model did so too but at a rather lower level of probability. As the gravity elements are strengthened the model's probability falls and vice versa. The two models' policy implications are also similar.
Subjects: 
Bootstrap
indirect inference
gravity model
classical trade model
UK trade
JEL: 
F10
F11
F12
F13
F14
F16
F17
Document Type: 
Working Paper

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