Working Paper: NBER ID: w14642
Authors: James E. Anderson
Abstract: The effects of geography and productivity on the global pattern of production are captured here in a specific factors gravity model. Simple enough for sharp results, the model is yet rich enough to contain the high dimensional productivity frictions in production and distribution of a many country world. The starting point is the international incidence of productivity frictions inferred from gravity. Sellers' and buyers' incidence both reduce real income. Sellers' incidence shocks reduce sectoral skill premia. Bigger sellers' incidence by country (sector) reduces equilibrium shares of world (national) GDP. In contrast to the generalized Ricardian gravity model of Eaton and Kortum (2002), relative factor endowments play a role and import-competing production and wage premia in exporting are featured.
Keywords: gravity model; productivity; trade patterns; resource allocation
JEL Codes: D24; F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| incidence of productivity frictions on sellers (L11) | sectoral skill premia (J31) |
| incidence of productivity frictions on sellers (L11) | equilibrium shares of world national GDP (F62) |
| incidence of productivity frictions on sellers (L11) | real incomes (E25) |
| incidence of productivity frictions on sellers (L11) | resource allocation (H61) |
| variance of productivity shocks (O49) | production efficiency (D24) |
| equilibrium sellers' incidence of productivity frictions (D59) | equilibrium production shares (D51) |