Other empirical evidence 2 intraindustry trade index

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Unformatted text preview: fferen/ated products => more imports Gravity Equa7on of Trade (following Newton’s Law of Gravita/on): GDP1GDP2 Trade1" 2 = B * dist n # GDP1GDP2 & log(Trade1" 2 ) = log B + log% ( n $ dist ' The Gravity Equa/on Other Empirical Evidence Testable predic/ons from the monopolis/c compe//on model of trade: 2.  Intra ­Industry Trade: –  Under monopolis/c compe//on, countries will specialize in producing different varie/es of a differen/ated good and will trade those varie/es back and forth. Other Empirical Evidence 2.  Intra ­Industry Trade: Index of intra ­industry trade (IIT): –  what frac/on of trade in product X involves both imports and exports Min {ImportsX , ExportsX } Index of IITX = 1 (Imports + Exports ) X X 2 ! –  A high index (100%) indicates that an equal amount of the good is imported and exported. –  A low index (O%) indicates that the good is either imported or...
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This document was uploaded on 01/18/2014.

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