ge_gravity2: A command for solving universal gravity models

Abstract

In this article, 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 ge_gravity2, which allows users to perform these computations in Stata. This command extends the existing ge_gravity 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 (2020, Journal of Political Economy 128: 393-433).