RDP 2007-10: Trade Costs and Some Puzzles in International Macroeconomics Equation (1)

\frac{I_{i t}}{Y_{i t}} = δ_{1 i} + ϕ_{1} \frac{S_{i t}}{Y_{i t}} + γ_{1} \frac{S_{i t}}{Y_{i t}} f_{i t} + θ_{1} f_{i t} + e_{1 i t}