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ch 2 notes - Class 2 gravity model is not working very well...

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Class 2- Jan 22, 2007 gravity model is not working very well In 2006, goods and services produced in world worth $48 trillion more than 25% sld across national borders. 5 largest trading partners with US in 2003- Canada, mexico, China, Japna, and Germany US trade- $13 trillion compare countries to total US not engaging in interntaional trade homogenously. Largest 10 partners with US account for 70% of the trade. US trade with China ½ of US trade with Canada 3 of top 10 trading partners with US in 2003 were also 3 largest in Europe Size of economy is related to the volume of exports and imports- produce more, sell more pull of one body on another- if mass is higher, pull is greater, if distance is close, pull also higher T = A * Y * Y/D t is trade level, A is constant inversely related to the distance between the countries problem- distance of 0. they say distance between US and Canada= 2000 take ln of both sides ln T = lnA + aln Yi + bln Yj – clnD
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