Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

Universal Gravity
December 18, 2014Macro, Trade, and Finance Seminar Series

Treb Allen (Northwestern) will share the results of recent research.

Speaker: Treb Allen is Assistant Professor, Department of Economics at Northwestern University.
More >

Abstract: What is the best way to reduce trade frictions when resources are scarce? To answer this question, we develop a framework that nests previous general equilibrium gravity models and show that the macro-economic implications of these various models depend crucially on two key model parameters, which we term the "gravity constants." Based only on the value of the gravity constants, we derive sufficient conditions for the existence and uniqueness of the trade equilibrium and, given observed trade flows, completely characterize all comparative statics for any change in bilateral trade frictions. We then develop a methodology for estimating these gravity constants without needing to assume a particular micro-foundation of the gravity trade model. Finally, we use these results to find the set of trade friction reductions that (to a first-order) maximize welfare gains given an arbitrary constraint.

Paper: Universal Gravity

Last Updated: Dec 12, 2014

The Macro, Trade, and Finance Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers from the fields of macroeconomics, growth, trade, international integration, and finance to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Event Details
  • Location: Washington, DC, World Bank Main Complex, MC 10-100
  • Time: 12:30 - 2:00 pm
  • CONTACT: Shweta Mesipam
  • smesipam@worldbank.org