The gravity model and international trade (original) (raw)
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Chapter 4 The Gravity Model in International Trade
2011
Since Jan Tinberben’s original formulation (Tinbergen 1962, Shaping the World Economy, The Twentieth Century Fund, New York), the empirical analysis of bilateral trade flows through the estimation of a gravity equation has gone a long way. It has acquired a solid reputation of good fitting; it gained respected micro foundations that allowed it to move to a mature stage in which the “turn-over” gravity equation has been replaced by a gravity model; and it has dominated the literature on trade policy evaluation. In this chapter we show how some of the issues raised by Tinbergen have been the step stones of a 50-year long research agenda, and how the numerous empirical and theoretical contributions that followed dealt with old problems and highlighted new ones. Some future promising research issues are finally indicated.
The Gravity Equation in International Trade
Oxford Handbooks Online, 2009
This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was "legitimized" by a series of theoretical articles that demonstrated that the basic GE form was consistent with various models of trade flows. Empirical applications of GE expanded to cover a variety of issues, such as the impact of regional trade agreements, national borders and currency unions on trade, as well as the use of the equation to sort out the relative merit of alternative trade theories. A new wave of studies is now concentrating on the general equilibrium properties of the GE and finer econometrics points. The renewed interest of the academic profession in the development of the GE is undoubtedly driven by the equation's empirical success.
THE GRAVITY MODEL OF TRADE: A THEORETICAL PERSPECTIVE
Review of Innovation and Competitiveness: A Journal of Economic and Social Research, 2019
Purpose. The purpose of this study is to trace the theoretical developments of the gravity model of trade. The key question is: what are the dominant features of the development of the gravity trade model? Methodology. This research is conducted by employing a number of methods that include the historical, descriptive and analytical methods. The main contribution of this paper is to trace the historical and theoretical development phases of the gravity model. Findings. This study is a novel attempt in terms of the identification of the four distinctive phases of the development of the gravity model. This work would, therefore, expand the existing literature on the gravity model. We argue that the development of the gravity model is the outcome of many research efforts. A large body of literature has given the model a solid theoretical foundation. But there is no consensus about the proper econometric estimation methods of the model. The gravity model is significant both historically and analytically.It is a useful tool for the analysis of international trade. It has become a popular research device used by the researchers and policy makers around the world. The gravity is regarded as one of the most successful models in the literature of international economics. Originality. The original contributions of this paper lie in streamlining the consistent historical development of the gravity model over a longer period of time-frame, ranging from 1885 to 2018. Limitations and Implications. This work is theoretical aspects of the trade gravity model. Future researchers could overcome the limitations by combining the theoretical and empirical studies in a paper. This paper can help the future researchers in dealing with the broad body of literature of gravity model
Review of innovation and competitiveness
Purpose. The purpose of this study is to trace the theoretical developments of the gravity model of trade. The key question is: what are the dominant features of the development of the gravity trade model? Methodology. This research is conducted by employing a number of methods that include the historical, descriptive and analytical methods. The main contribution of this paper is to trace the historical and theoretical development phases of the gravity model. Findings. This study is a novel attempt in terms of the identification of the four distinctive phases of the development of the gravity model. This work would, therefore, expand the existing literature on the gravity model. We argue that the development of the gravity model is the outcome of many research efforts. A large body of literature has given the model a solid theoretical foundation. But there is no consensus about the proper econometric estimation methods of the model. The gravity model is significant both historically...
Special issue on the estimation of gravity models of bilateral trade: Editors’ introduction
Empirical Economics, 2015
We were fortunate to have been able to solicit papers for this special issue of Empirical Economics from the CESifo Workshop entitled "On the estimation of gravity models of bilateral trade" that took place on May 30-31, 2014, in Munich, Germany. The workshop was organized by the guest editors, and the local organization and sponsorship were generously provided by CESifo as well as ETH Zurich to which we are thankful. This special issue in Empirical Economics contains important contributions for the gravity model of bilateral trade as well as econometric methodology applied to this model. These include simultaneous quantiles regression, a random coefficients model, generalized linear models (GLMs), and fixed effects panel data models. All of the papers selected for this special issue have gone through the usual process of peer review for Empirical Economics, and we would like to thank all of the referees for their hard work.
Using the gravity equation to differentiate among alternative theories of trade: another look
Applied Economics Letters, 2007
The simple gravity equation explains a great deal about the data on bilateral trade flows, and is consistent with several theoretical models of trade. We argue that alternative theories nevertheless predict subtle differences in key parameter values, depending on whether goods or homogeneous or differentiated, and whether or not there are barriers to entry. Our empirical work for differentiated goods delivers results consistent with the theoretical predictions of the monopolisticcompetition model, or a reciprocal-dumping model with free entry. Homogeneous goods are described by a model with national (Armington) product differentiation or by a reciprocaldumping model with barriers to entry.
The Gravity Model in International Trade
2011
This is a beautiful survey of the Gravity model in international trade. It is more empirically oriented than other beautiful surveys (see Anderson 2011 or Bergstrand and Egger 2010), it takes Jan Tinbergen's contribution as a reference point, and it highlights the possible new directions that the literature on gravity should or may take.
The Gravity Model for Trade Theory
Köz-gazdaság
The Gravity Model for Trade Theory This article delivers a theoretical overview of the gravity model and some of its main applications. The goal is as well to provide some criticism and to discuss the effectiveness of this widely used model. The model, in fact, not only did not lose its appeal over time but, on the contrary, it continued to develop and to become more reliable and relevant. It becomes clear that, although it has some problems and limitations, the gravity model is still a widely used and compelling tool, especially in the trade flow area. Jelen cikk a gravitációs modellról és annak fő alkalmazásairól nyújt áttekintést. A tanulmány további célja a széleskörben használt modell hatékonyságának megvitatása. A modell nem csak, hogy nem veszített népszerűségéből, hanem megbízhatóbbá és relevánsabbá vált. Világos, hogy a modell korlátai ellenére még mindig széleskörben bevett vizsgálati eszköz, különösen a kereskedelem terén.