As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Geneva Graduate Institute is pleased to invite you to a public talk given by Harald Fadinger, Professor at the University of Mannheim. We are pleased to host this talk in collaboration with the Geneva Trade and Development Workshop.
He will present his work, jointly with Holger Breinlich, Volker Nocke and Nicolas Schutz, titled Gravity with Granularity.
Abstract: We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade flows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We demonstrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors.
About the speaker
Harald Fadinger is a Professor of Economics at the University of Mannheim and a Research Fellow at the Centre for Economic Policy Research (CEPR), London. He holds a PhD in Economics (2008) from Pompeu Fabra University, Barcelona. His main research interests are international trade, international economics, macroeconomics, and organizational economics.