Elasticity wrt fixed costs 1 1 is negatively related

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Unformatted text preview: e). Thomas Chaney (University of Chicago) ECON 357 11 / 17 Gravity equation Similar structure, Chaney and Krugman, X Chaney = Li Lj ij - f -( -1 -1) = si ij L ij j ij L j N=1 sk kj k -(-1) ~ Krugman ~LL ~ s X = iL j ij = N i sij Lj ij ~j k =1 k ~ kj -1 ) - -( ij = ij fij -1 with = -(-1) ~ ij ij Exports from i depends on trade barriers from i relative to weighted average of trade barriers from k's. Thomas Chaney (University of Chicago) ECON 357 12 / 17 Intensive versus extensive margins Average size of exporters versus number of exporters, E rij ( ) | ij = fij N = Li Lj ij - f -( -1 -1) f ij ij ij L j Problem 1: relative exports conditional on export vary a lot, 1- rij ( ) ij = rik ( ) , ik ij ik Possible fix: random shocks + Arkolakis (2008). Problem 2: average exports decrease with distance. Possible fix: global fixed export costs (Hanson & Xiang 2008). Thomas Chaney (University of Chicago) ECON 357 13 / 17 Intensive versus extensive margins dXij = + ^ ^ ij ij Intensive margin ij ri...
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This note was uploaded on 04/26/2013 for the course ECON 521 taught by Professor Danieldias during the Spring '13 term at University of Illinois, Urbana Champaign.

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