gegravity2: a command for solving universal gravity models
Abstract
We describe an algorithm for computing counterfactual trade flows, prices, output, and welfare in a large class of general equilibrium trade models. We introduce a command called gegravity2 that allows users to perform these computations in Stata. This command extends the existing gegravity command by allowing users to compute the general equilibrium effects of changes in trade policy in positive supply elasticity models. It can be used to solve any model that falls into the class of universal gravity models as defined by Allen, Arkolakis, and Takahashi [Universal Gravity, Journal of Political Economy, 128(2), 2020, 393-433].
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