Gravity: a popular tool Gravity: a recap Standard proxies for trade costs Initial equation estimated Theoretical foundation: historical evolution Technical derivation Multilateral resistance: the intuition Theoretically founded equation Gravity specification of Multilateral trade resistance Country fixed effects Cross country equation (1 year) It is impossible to estimate the coefficient of GDP or other country specific variable More than 1 year: panel data Panel data: time-varying fixed effects Estimating using country-pair fixed effects Random effects: use Hausman test in order to choose between random and fixed effects estimation Recent theoretical developments Data sources