Advanced Trade Policy Analysis | The Structural Gravity Model

"An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model" (2016), co-published by the World Trade Organization and the United Nations Conference on Trade and Development.

The gravity model of trade is (among) the most successful and celebrated economic models. However, despite solid theoretical foundations and remarkable predictive power, the empirical gravity equation is often applied a-theoretically and without account for estimation challenges that may render gravity estimates biased and even inconsistent. Furthermore, while trade theory and trade policy analysis are performed in a general equilibrium setting, doing competent general equilibrium analysis is not a trivial task. This book capitalizes on cutting-edge academic research in order to: (i) offer a comprehensive and balanced (between theory and empirics) approach to trade policy analysis with the structural gravity model, and (ii) provide deep intuition and practical guidance in order to make partial and general equilibrium trade policy analysis accessible to students, applied economists, and policy makers.

I dedicate my contributions to this book to James E. Anderson. Thanks Jim for being a patient mentor and an inspiration for research!!

 

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Supplementary Materials

Extended versions of the two main chapters of the book are available as working papers on the estimation (WTO-WP-16-08) and general equilibrium analysis (WTO-WP-16-10) with the structural gravity model.