Intra-industry Trade and the Gravity Equation: A Cournot-Ricardo Approach
This paper shows that Cournot competition in segmented markets generate both intra-industry trade and the gravity equation. The paper also demonstrates that the gravity equation holds if and only if the market shares of an exporting country do not depend on the market where it sells. Thus, the widel...
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| Format: | Article |
| Language: | English |
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Korea Institute for International Economic Policy
2000-12-01
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| Series: | East Asian Economic Review |
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| Online Access: | http://dx.doi.org/10.11644/KIEP.JEAI.2000.4.4.72 |
| Summary: | This paper shows that Cournot competition in segmented markets generate both intra-industry trade and the gravity equation. The paper also demonstrates that the gravity equation holds if and only if the market shares of an exporting country do not depend on the market where it sells. Thus, the widely accepted wisdom that specialization generates the force of gravity is not well grounded on theory. |
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| ISSN: | 2508-1640 2508-1667 |