Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252101 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9584
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
On the eve of its 60th anniversary, the gravity model of trade is a 'celebrity', due to its intuitive appeal, solid theoretical foundations, and remarkable empirical success. Yet, many economists still view gravity simply as an intuitive but naive reduced-form estimating equation and apply it without guidance from theory, while others are skeptical about its usefulness for counterfactual projections. The objective of this paper is to offer a historical overview of its evolution from an a-theoretical application to an estimating computable general equilibrium (E-CGE) model, which can be nested in more complex frameworks. Along the way, I address some misconceptions about the gravity model, summarize the current best practices for gravity estimations, and highlight some properties that have made gravity so successful.
Subjects: 
structural gravity
evolution
theory
estimation general equilibrium
JEL: 
F13
F14
F16
Document Type: 
Working Paper
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