Novy, Dennis - In: Journal of International Economics 89 (2013) 2, pp. 271-282
This paper derives a micro-founded gravity equation based on a translog demand system that allows for flexible … substitution patterns across goods. In contrast to the standard CES-based gravity equation, translog gravity generates an … trade flows predicted to be zero. I test the translog gravity equation and find empirical evidence that is in many ways …