2022 Best CEP Article Award Announced!
"On the Role of Domestic Trade Flows for Estimating the Gravity Model of Trade"
The Editors of Contemporary Economic Policy are pleased to congratulate the recipient of the 2022 Best Article Award!
Yoto Yotov, Drexel University
The gravity equation is the workhorse model of trade. Despite solid theoretical foundations and clear gains from theory-consistent policy analysis, there are still gaps between gravity theory and empirics. This paper focuses on domestic trade flows, and I argue that there are significant benefits from adhering to theory by estimating gravity equations with domestic (in addition to international) trade flows. I review the related literature and synthesize 15 arguments for using domestic trade flows in gravity estimations. The analysis reveals the need for further theory contributions and new data developments, and points to opportunities for more policy applications.
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