2.4 Capturing the dyadic component: the Tetrad method Because we are interested in the time-varying effect of independence on trade
between a metropole (colonizer), colony and siblings (other colonies), in the Soviet
Union context, apart from standard gravity analysis, it is sensible for us to adopt
the so-called Tetrad method. HMR (
2010
) show that by taking a ratio of ratios of
bilateral trade flows (i.e., a tetrad of the flows) in the following form we can obtain
t (il)(jk)t , a tetrad of the dyadic components:
where x denotes bilateral trade flow and additional subscripts (k and l) stand for two
particular reference countries. This is well explained in HMR (
2010
) study but
essentially we can understand (
9
), if we replace x’s with gravity components on the
r.h.s. of (1), the monadic and global constant components cancel out leaving
d ij ∕d ik d lj ∕d lk alone. Because d ijt = 𝜏 1
−𝜎 ijt , and given that 𝜎 is the same across all countries, then (
9
)
is also a measure of trade costs (both observable and unobservable costs) relative to
their level at two chosen reference countries (l, k):
(8)
d ijt = 𝜏 1
−𝜎 ijt ,
(9)
t (il)(jk)t =
x ijt ∕x ikt x ljt ∕x lkt =
d ijt ∕d ikt d ljt ∕d lkt ,
Economic Change and Restructuring (2021) 54:877–918
889
1 3
More detailed discussion on this method is in HMR (
2010
).
