The Geographic Space in International Trade: from Gravity to New Economic Geography

Cafiso, Gianluca (2007): The Geographic Space in International Trade: from Gravity to New Economic Geography.

Abstract

In this paper we discuss the foundations of two recent trade theories linked by the role that the space-dimension plays in this kind of models. The theories discussed are the Gravity Approach and the New Economic Geography. We dedicate much to the explanation of the micro-foundations of the gravity equation and to the solution of the Border Puzzle achieved in a relevant and innovative paper by Anderson and van Wincoop. Some upto-date empirical applications, which test or use Gravity and NEG relations, are discussed in order to show how much these two theories are used in empirical trade analysis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gravity, Trade Costs, Border Puzzle, Economic Geography
• Subjects: F - International Economics > F1 - Trade > F10 - General

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