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Institutional Affiliation: Office of the US Trade Representative
NBER Working Papers and Publications
|June 2018||Gravity and Comparative Advantage: Estimation of Trade Elasticities for the Agricultural Sector|
with : w24772
In this paper, a structural gravity model is presented which features intra-sector heterogeneity in agricultural productivity systematically linked to land and climate characteristics. The “systematic heterogeneity” (SH) gravity model predicts that countries with similar land and climate characteristics tend to specialize in the same agricultural products. Agricultural trade flow elasticities then depend on comparative advantage, with larger-magnitude trade flow responses predicted among countries more likely to specialize in similar agricultural products and thus compete head-to-head in foreign markets. This is in contrast to standard log-linear gravity models, which impose a restrictive pattern of trade flow elasticities that depend only on absolute advantage in the agricultural sector....