RDP 2014-07: International Trade Costs, Global Supply Chains and Value-added Trade in Australia Equation (D1)

x_{i j t}^{s} = (\frac{y_{i t}^{s} \times y_{j t}^{s}}{y_{t}^{s w}}) \times {(\frac{τ_{i j t}^{s}}{P_{i t}^{s} \times P_{j t}^{s}})}^{(1 - σ^{2})}