Structural Gravity | Intensive Course & Professional Workshop


NEW: Do you want to learn how to quantify the partial and general equilibrium effects of trade policy, while contributing to a good cause? If so, consider taking my course on "Trade Policy Analysis with the Structural Gravity Model." More information about the course can be found on this web site. If interested, fill this APPLICATION FORM by April 30, 2021.

Motivation and Background

I have been compiling and constantly updating the materials for this course since the early years of my career, which started under the guidance of the father of the gravity model of trade, Professor James E. Anderson. The first complete version of the course was stimulated by the opportunity to write the "An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model" (with Larch, Monteiro, and Piermartini), which was co-published by the World Trade Organization and the United Nations Conference on Trade and Development. The more recent versions of the course incorporate the latest developments in the gravity literature, which will be summarized in the new gravity book that I am currently working on.

I have delivered versions of my gravity course to participants from more than 130 countries in a number of universities, international organizations, national governments, think tanks, and research centers and institutes. Most recently, I have been teaching the course for a good cause. Specifically, on April 21, 2019, I started the “Gravity with Gravitas for Autism” initiative with the goal to earn €50,000 for supporting children with autism in my hometown, Pleven, Bulgaria. You can follow my progress at @YotovGravity.

This web page offers details for the course. Comments are welcome at yotov@drexel.edu.

Description and Objectives

The objective of this course is to serve as a practical guide for trade policy analysis with the structural gravity model, i.e., the workhorse model in international trade. To achieve its objective, the course combines cutting edge academic research and extensive policy experience, and it offers a comprehensive and balanced approach between theory and empirics. The course traces the evolution of the structural gravity model from its initial a-theoretical applications to the most recent structural estimation gravity frameworks, e.g. dynamic gravity. After deriving the original gravity model step by step, it is shown that it can also be derived from a very wide range of theoretical micro-foundations. Guided by theory, a set of best practices and recommendations are established for partial equilibrium gravity estimations, and their importance is demonstrated with a series of trade policy applications, e.g., evaluating the impact of FTAs, sanctions, institutional quality etc. The same gravity framework is then used to translate the partial equilibrium estimates into full general equilibrium effects on various economic outcomes, e.g., trade, prices, welfare. The course concludes with a demonstration of how the gravity model of trade can be nested into a wide range of production models with a focus on dynamic capital accumulation and FDI. The lectures are complemented by hands-on practice sessions that allow students to fully experience and experiment with the partial as well as the general equilibrium capabilities of the model. Importantly, owing to recent research developments, all experiments and exercises in this course (including the general equilibrium simulations), are performed with standard built-in commands directly in Stata.

Audiences

The course was designed for and has been beneficial to various audiences, including: (i) Applied Economists and Policy Makers, who use the gravity model as a tool to answer specific questions of interest to them; (ii) Advanced Master Students in the fields of Economics, Public Policy (quantitative track), and International Relations (quantitative track); (iii) Ph.D. Students in the fields of International and Development Economics, Public Policy, and International Relations (quantitative track); (iv) Academic Researchers, who would benefit from a comprehensive refreshment and an update on the latest developments in this area; Occasionally, the course has been taken by some very talented (v) undergraduate students too. The following is a list of the places where I have taught the course, most recently, as part of my “Gravity with Gravitas for Autism” initiative.

-- Drexel University -- MS (Online, USA, Winter 2021);
-- Universite Paris-Dauphine-PSL (Online, FRA, January 2021);
-- ESCAP and ARTNeT (Online, Thailand, December 2020);
-- Kiel Institute (Online, Kiel, December 2020);
-- University of Munich (Online, DEU, Fall 2020);
-- Spanish Association of International Economics and Finance (Online, ESP, Fall 2020);
-- University of Tokyo (Online, JPN, Fall 2020);
-- University of Duisburg-Essen (Online, DEU, July 2020);
-- International Monetary Fund, (Washington DC, USA, January 2020);
-- Drexel University -- MS (USA, Winter 2020);
-- Washington DC, (Washington DC, USA, December 2019);
-- Bank of Spain, (Madrid, ESP, November 2019);
-- Universitat Jaume I Castellón (Valencia, ESP, October 2019);
-- Bank of England, (London, UK, October 2019);
-- OECD, (Paris, FRA, September 2019);
-- Deutsche Bundesbank (Frankfurt, DEU, September 2019);
-- Arab Monetary Fund (Abu Dhabi, ARE, September 2019);
-- University of Tubingen (Tubingen, DEU, July 2019);
-- World Trade Organization, ERSD (Geneva, CHE, Summer 2019);
-- Universita Politecnica delle Marche (Ancona, ITA, June, 2019);
-- CES University of Munich (Munich, DEU, April, 2019);
-- Katholieke Universiteit Leuven (Leuven, BEL, April, 2019);
-- Trier University (DEU, March, 2019);
-- Drexel University -- Ph.D. (USA, April 2016);
-- World Trade Organization, ERSD (Geneva, CHE, Summer 2018);
-- Leibniz University Hannover (DEU, October, 2018);
-- Joint Vienna Institute (AUT, September 2017);
-- “D.A. Tsenov” Academy of Economics, Svishtov (BGR, October 2016);
-- Kiel Institute for the World Economy (DEU, August 2016);
-- University of Ottawa / Global Affairs Canada (CAN, June 2016);
-- US International Trade Commission (USA, June 2016);
-- Drexel University -- Ph.D. (USA, April 2016);
-- World Trade Organization, ERSD (Geneva, CHE, Summer 2016);
-- National University of Singapore (SGP, March 2016);
-- Princeton University (USA, Fall 2015);
-- Drexel University -- MS (USA, Fall 2015);
-- World Trade Organization, ERSD (Geneva, CHE, Summer 2015);
-- World Bank, Development Research Group (USA, Nov. 2015);
-- Ifo Institute--Center for International Economics (DEU, June 2015).

Course Structure

Most of the time, I have delivered the course as a stand-alone intensive class. However, sometimes, I have also offered different parts of my course as modules in existing Ph.D. or Master-level courses taught by other colleagues. The most comprehensive version of the course includes three modules (lectures, hands-on sessions, and empirical projects), which build on each other. Most often, I have taught the first two modules (lectures and hands-on sessions) together, while the third module was most beneficial and effective when the course was spread out over at least a month.

Module I: Lectures

This module consists of standard lecturing and does not require the use of computers.

Lecture 1: The Gravity Model of International Trade: Introduction and Theoretical Foundations.
Duration: About 2 astronomical hours.

Lecture 2: Estimating Structural Gravity: Challenges, Solutions, and Applications.
Duration: About 3 astronomical hours.

Lecture 3: General Equilibrium Analysis with the Gravity Model. Theory and Applications
Duration: About 2 astronomical hours.

Lecture 4: Nested Gravity: A Dynamic Gravity Model of Trade and Growth. Trade and FDI with Dynamics.
Duration: About 2 astronomical hours.

Module II: Hands-on Sessions

This module requires computers and Stata (version 14 or higher).

Session 1: Hands-on Session on Estimating Structural Gravity. Applications. (Stata required)
Duration: About 2 astronomical hours.

Session 2: Hands-on Session on GE Analysis with the Structural Gravity model. Applications. (Stata required)
Duration: About 2 astronomical hours.

Module III: Research Projects

This module is designed for longer versions of the course, when the participants have time to work on empirical research projects, which are designed to offer them with the opportunity to apply the analytical and empirical concepts that we have learned in class in order to evaluate the outcomes of a hypothetical trade policy scenario (e.g., studying the impact of NAFTA, GATT/WTO membership, Brexit, etc.) with the structural gravity model. Usually, students can select among several research topics. However, sometimes they have come with a topics on their own. In most cases, the research projects are presented at an end-of-term research conference.

Prerequisites

Because the gravity model is very intuitive, the course is accessible to a wide range of audiences, even to participants with limited technical skills, especially if they have good intuition and solid policy background. However, the course is most beneficial to participants who have had advanced undergraduate-level or master-levels Microeconomic Analysis and Econometric Analysis. Previous experience with Stata, including data manipulation and use of canned estimation commands (no coding!) is also required. Advanced undergraduate-level or master-level knowledge of International Trade is not a formal prerequisite but will be a very beneficial asset to the participants in this course.

Required Readings

The course is developed around the following book and the accompanying two working papers,
which are extended versions of the book's two main chapters.

[1] "An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model"
Yotov, Y. V., R. Piermartini, J. A. Monteiro, and M. Larch
co-published by UNCTAD and WTO, 2016.

[2] "Estimating Trade Policy Effects with Structural Gravity"
Piermartini, R. and Y. V. Yotov, 2016.

[3] "General Equilibrium Trade Policy Analysis with Structural Gravity"
Larch, M. and Y. V. Yotov, 2016.

Highly Recommended Readings

The two required readings cover a large number of important related studies and I refer the interested reader to the bibliography sections of the above papers. The following are five academic papers that are the most closely related to the course material.

[1] "Gravity with Gravitas: A Solution to the Border Puzzle"
Anderson, J. E., and E. van Wincoop. 2003. American Economic Review, 93(1): 170–192.

[2] "Estimating General Equilibrium Trade Policy Effects: GE PPML"
Anderson, J. E., M. Larch, and Y. V. Yotov, 2015. CESifo Working Paper Series 5446.

[3] "The Changing Incidence of Geography"
Anderson, J. E. and Y. V. Yotov, 2010. American Economic Review, vol. 100(5), pages 2157-86.

[4] "Technology, Geography, and Trade"
Eaton, J. and S. Kortum, 2002. Econometrica, vol. 70(5), pages 1741-1779.

[5] "The Log of Gravity"
Santos Silva, J.M.C. and S. Tenreyro, 2006. Review of Economics and Statistics, 88(4): 641–658.

Recommended Survey Readings

The following are excellent surveys that complement the main reading materials for the course.

[1] "The Gravity Model"
Anderson, J.E. 2011. Annual Review of Economics, 3:133-60.

[2] "Gravity for Dummies and Dummies for Gravity Equations"
Baldwin, R. and D. Taglioni, 2006. NBER Working Papers 12516.

[3] "Trade Theory with Numbers: Quantifying the Consequences of Globalization"
Costinot, A., and A. Rodríguez-Clare, 2014. in the Handbook of International Economics Vol. 4, eds. G. Gopinath, E. Helpman, and K. Rogoff.

[4] "Gravity Equations: Workhorse, Toolkit, and Cookbook"
Head, K. and T. Mayer, 2014. in the Handbook of International Economics Vol. 4, eds. G. Gopinath, E. Helpman, and K. Rogoff.

[5] "Practical Guide to Trade Policy Analysis"
World Trade Organization and United Nations Conference on Trade and Development, 2012.