Alan V. Deardorff
- Published in print:
- 1997
- Published Online:
- February 2013
- ISBN:
- 9780226259956
- eISBN:
- 9780226260228
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226260228.003.0002
- Subject:
- Economics and Finance, International
It has long been recognized that bilateral trade patterns are well described empirically by the so-called gravity equation, which relates trade between two countries positively to both of their ...
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It has long been recognized that bilateral trade patterns are well described empirically by the so-called gravity equation, which relates trade between two countries positively to both of their incomes and negatively to the distance between them, usually with a functional form that is reminiscent of the law of gravity in physics. It also used to be frequently stated that the gravity equation was without theoretical foundation. In particular, it was claimed that the Heckscher-Ohlin model (HO model) of international trade was incapable of providing such a foundation, and perhaps even that the HO model was theoretically inconsistent with the gravity equation. This chapter argues that the HO model, at least in some of the equilibria that it permits, admits easily of interpretations that accord readily with the gravity equation. At the same time, developing these interpretations can yield additional insights about why bilateral trade patterns in some cases depart from the gravity equation as well. After describing the theoretical foundations for the gravity equation, the chapter examines frictionless trade and trade impediments.Less
It has long been recognized that bilateral trade patterns are well described empirically by the so-called gravity equation, which relates trade between two countries positively to both of their incomes and negatively to the distance between them, usually with a functional form that is reminiscent of the law of gravity in physics. It also used to be frequently stated that the gravity equation was without theoretical foundation. In particular, it was claimed that the Heckscher-Ohlin model (HO model) of international trade was incapable of providing such a foundation, and perhaps even that the HO model was theoretically inconsistent with the gravity equation. This chapter argues that the HO model, at least in some of the equilibria that it permits, admits easily of interpretations that accord readily with the gravity equation. At the same time, developing these interpretations can yield additional insights about why bilateral trade patterns in some cases depart from the gravity equation as well. After describing the theoretical foundations for the gravity equation, the chapter examines frictionless trade and trade impediments.
Bumba Mukherjee
- Published in print:
- 2016
- Published Online:
- January 2017
- ISBN:
- 9780226358789
- eISBN:
- 9780226358956
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226358956.003.0002
- Subject:
- Political Science, International Relations and Politics
This chapter starts by providing the foundation for the book’s central theoretical model that explores the link between democratization and trade reforms in developing countries. The chapter builds ...
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This chapter starts by providing the foundation for the book’s central theoretical model that explores the link between democratization and trade reforms in developing countries. The chapter builds on this foundation to understand how political competition over office by political parties in the context of new democratic institutions affects trade policy given certain labor market conditions. The theoretical model then uses the logic of game-theory to analyze how labor market conditions affects the domestic balance of political power between labor and capital in a newly democratized regime and how this in turn influences the design of trade policy by political parties (including the ruling party) in this regime. The model is then extended to understand when and how the adoption of trade reforms in new democracies may decrease the likelihood of electoral malpractices in these regimes and thus foster democratic consolidation.Less
This chapter starts by providing the foundation for the book’s central theoretical model that explores the link between democratization and trade reforms in developing countries. The chapter builds on this foundation to understand how political competition over office by political parties in the context of new democratic institutions affects trade policy given certain labor market conditions. The theoretical model then uses the logic of game-theory to analyze how labor market conditions affects the domestic balance of political power between labor and capital in a newly democratized regime and how this in turn influences the design of trade policy by political parties (including the ruling party) in this regime. The model is then extended to understand when and how the adoption of trade reforms in new democracies may decrease the likelihood of electoral malpractices in these regimes and thus foster democratic consolidation.
