TY  - JOUR
AU  - Baldwin,Richard
AU  - Taglioni,Daria
TI  - Gravity for Dummies and Dummies for Gravity Equations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12516
PY  - 2006
Y2  - September 2006
UR  - http://www.nber.org/papers/w12516
L1  - http://www.nber.org/papers/w12516.pdf
N1  - Author contact info:
Richard Baldwin
Cigale 2
1010 Lausanne
SWITZERLAND
Tel: 41-22-908-5900
E-Mail: rbaldwin@cepr.org

Daria Taglioni
Centre for Trade and Economic Integration
Institut de hautes études internationales 
  et du développement
The Graduate Institute of International 
  and Development Studies Case 
postale 136 -  CH - 1211 Genève 21 - Suisse
E-Mail: daria.taglioni@graduateinstitute.ch
AB  - This paper provides a minimalist derivation of the gravity equation and uses it to identify three common errors in the literature, what we call the gold, silver and bronze medal errors. The paper provides estimates of the size of the biases taking the currency union trade effect as an example. We generalize Anderson-Van Wincoop's multilateral trade resistance factor (which only works with cross section data) to allow for panel data and then show that it can be dealt with using time-varying country dummies with omitted determinants of bilateral trade being dealt with by time-invariant pair dummies.
ER  -