GEGravity is an R packge that replicates the functionality of the ge_gravity Stata package for streamlined use within the R ecosystem. In summary, ge_gravity solves for general equilibrium effects of changes in trade policies using a one sector Armington-CES trade model. It uses a simple fixed point algorithm that allows for fast computation. This approach, together with the implementations in R and Stata, makes it ideal for bootstrapping confidence intervals for general equilibrium simulations based on prior gravity estimates of FTAs or other similar variables. Examples of references that conduct general equilibrium analysis based on FTA estimates in this way include Egger, Larch, Staub, & Winkelmann (2011), Anderson & Yotov (2016), and Baier, Yotov, & Zylkin (2019). Yotov, Piermartini, Monteiro, & Larch (2016) provide a detailed survey and introduction to the topic.
For more details on the options and functionalities included with this command, a more in-depth discussion can be found in the R documentation file and vignettes found in this repository. For Stata users, the Stata folder contains an example .do file and help file along with the current version of the ge_gravity Stata package.
The Armington-CES and Eaton-Kortum trade models are widely used frameworks in international economics for quantifying the effects of trade polices. Having a standard package for solving these models promotes replicability and saves researchers from having to write their own algorithms or adapt unpackaged code.
For students, the ge_gravity command can be used as a simple tool for demonstrating how general equilibrium effects matter for trade policy analysis. More technically inclined students can use the included vignettes to demystify how GE trade models work and to learn some basic techniques for solving them numerically.
Required:
- R (>= 2.10)
Suggested:
- alpaca (>= 0.3.1) (to compute fixed effect GLM)
- rmarkdown (>= 2.1) (to view the vignettes)
- data.table (>= 1.14) (to facilitate bootstrapping)
- devtools (>= 1.13.6) (to install from github)
- knitr (to knit the vignettes)
As of now, the package has been submitted to the CRAN. Once it has been accepted, you may install and load the package like usual (i.e. install.packages("GEGravity") to install and library("GEGravity") to load).
Otherwise, one can use the package in a streamlined manner by installing from github. Use devtools::install_github("VKudlay/GEGravity").
Alternatively, either download the GEGravity/ folder or clone the repository and navigate to it, then open GEGravity.Rprog in RStudio.
To see worked examples and a tour of the code's inner workings, open the .Rmd files found in the Vignettes/ subfolder from within RStudio. The .Rmd files can either be run interactively from within R or they can be knit into easily readable html files using the knitr package. To load in package data, run data(...), i.e. data(TradeData0014).
Funding for this R package was provided by the Department for Digital, Culture, Media and Sport, United Kingdom.
The Stata/ folder contains the current version of the ge_gravity Stata package along with a help file and worked examples.
To install from within in Stata, enter ssc install ge_gravity, replace.
If you are using either of these packages in your research, please cite
- Baier, Scott L., Yoto V. Yotov, and Thomas Zylkin. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration". Journal of International Economics 116 (2019): 206-226.
The algorithm used in these packages was specifically written for the exercises performed in this paper. Section 6 of the paper provides a more detailed description of the underlying model and its connection to the literature.
Anderson, J. E. & Yotov, Y. V. (2016), “Terms of trade and global efficiency effects of free trade agreements, 1990–2002”, Journal of International Economics 99, 279–298.
Baier, S. L., Yotov, Y. V., & Zylkin, T. (2019), “On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration”, Journal of International Economics 116, 206–226.
Egger, P., Larch, M., Staub, K. E., & Winkelmann, R. (2011), “The Trade Effects of Endogenous Preferential Trade Agreements”, American Economic Journal: Economic Policy 3(3), 113–143.
Yotov, Y. V., Piermartini, R., Monteiro, J.-A., & Larch, M. (2016), An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model, World Trade Organization, Geneva.