The gravity equation and the interdependency of trade costs and international trade [Elektronische Ressource] / Stephan Rudolph

The Gravity Equation and theInterdependency of Trade Costs andInternational TradeDoctoral DissertationStephan RudolphFaculty of Business Management and EconomicsTechnische Universit at DresdenReferees: Prof. Dr. Udo Broll, Prof. Dr. Georg HirteJanuary 10, 2011Contents1 Introduction 12 The Gravity Equation: Theory and Application 82.1 Theoretical Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.1.1 Demand Side Models . . . . . . . . . . . . . . . . . . . . . . . . . . 112.1.2 A Supply Side Model . . . . . . . . . . . . . . . . . . . . . . . . . . 162.1.3 Gravity Equations Derived from New-new Trade Theory . . . . . . 172.2 Empirical Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192.2.1 The Basic Speci cation . . . . . . . . . . . . . . . . . . . . . . . . . 192.2.2 Dealing with Unobservable Country Characteristics: Fixed E ects . 202.2.3 Dealing with Zero-Trade-Flows: Non-linear Estimators . . . . . . . 232.2.4 Dealing with Endogeneity and Simultaneity: Instrumental Variables 252.3 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 A Theory of Endogenous Trade Costs 28ICONTENTS3.1 A Theory Based Gravity Equation . . . . . . . . . . . . . . . . . . . . . . 313.2 A Micro-founded Form of Trade Costs . . . . . . . . . . . . . . . . . . . . 363.3 Economies of Scale in International Commodity Trade . . . . . . . . . . . 373.