Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/330838 
Year of Publication: 
2025
Citation: 
[Journal:] Economics Letters [ISSN:] 1873-7374 [Volume:] 254 [Article No.:] 112476 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2025 [Pages:] 1-5
Publisher: 
Elsevier, Amsterdam
Abstract: 
A large number of recent papers employ value-added trade data alongside traditional gross measures of trade to estimate the impact of various trade costs on bilateral trade. Value-added gravity equations are typically justified by referencing the theoretical and empirical merits of traditional gravity equations for gross trade. Contradicting this notion, we use theory and simulations to show that value-added gravity equations are misspecified when the gross trade gravity equation is correct. Consequently, estimates from value-added gravity equations are difficult to interpret and prone to omitted variables bias.
Subjects: 
Structural gravity
Trade in value added
JEL: 
F12
F15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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