The gravity model of trade

Shahriar, Saleh; Lu, Qian; Kea, Sokvibol; Abdullahi, Nazir Muhammad

doi:10.32728/ric.2019.51/2

Cited by 25 publications

(9 citation statements)

References 78 publications

(83 reference statements)

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“…In addition, the gravity model has been applied to investigate the effects of bilateral trade for numerous countries [18,19] using various variables including population, culture [17], GDP, geographical distance, currencies [20,21], population [12], transportation cost and trading blocs [22], institutional framework [23], fixed exchange rate [24], and adjacent borders [25]. This model has a broad scope regarding the literature of international economics [26]. Meanwhile, the gravity model is widely used and known as the "workhorse" of empirical studies for evaluation of the bilateral country-pair fixed effects in order to manage the heterogeneity.…”

Section: Introductionmentioning

confidence: 99%

Empirical Analysis of Factors Affecting the Bilateral Trade between Mongolia and China

et al. 2021

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This study analyzes the factors influencing the bilateral trade between Mongolia and China using the trade gravity model, principle component analysis (PCA), unit root test, bound test, and the estimation of coefficients in a panel data set from 1996–2019. A total of 9 variables including exports, gross domestic product (GDP), population, geographical distance, cultural distance, trade agreements, tariffs, trade facilitation index of China and Mongolia-China trade cost were considered for all models. The results indicate that the cultural distance between Mongolia and China and the population of Mongolia are stationary at level. The coefficient of GDP (income) of both countries is positive and statistically significant with exports. Moreover, trade facilitation has significant positive impact on exports of both countries. These findings reveal that efforts in improving excellence of border administration, arrangements would make a positive contribution in trade of goods. Another major influencing factor is tariffs, which was negatively significant for exports, suggesting that if China imposes 1% tariffs on Mongolian exports, it will result in 24% decrease of Mongolian exports. The results of regression coefficients show that there is long run association between variables. This indicates that China adopted a more restrictive trade policy on the flow of goods from Mongolia with an increase population of China. The study suggests a free trade agreement and relaxation of export/import procedures for Mongolia in order to increase the GDP of Mongolia.

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Section: Introductionmentioning

confidence: 99%

Empirical Analysis of Factors Affecting the Bilateral Trade between Mongolia and China

et al. 2021

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“…It could be explained by the highly negative significance of ln distrance and continent j . In the gravity literature, distance is taken as a proxy to trade costs (Shahriar et al, 2019b). As a trade resistance factor, distance dampens bilateral leather trade.…”

Section: Resultsmentioning

confidence: 99%

Determinants of Bangladesh’s Leather Exports to Its Major Trade Partners: A Panel Gravity Model Approach

Shahriar

Kea

Abdullahi

et al. 2021

Global Business Review

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The purpose of this research is to study the determinants of export, import and overall trade performance. The article employed the panel gravity model along with the analytical approaches of the fixed-effects, random-effects, Poisson Pseudo-Maximum-Likelihood (PPML) and Heckman selection models. This analysis is based on a panel data set from 1989 to 2015 (27 years) for a total of 20 selected largest leather importing partners. The findings are consistent with the Heckscher–Ohlin (H–O) theory, meaning that Bangladesh could chase for the comparative advantage in the leather industry through the effective planning and efficient utilization of its abundant population of 163 million. It is demonstrated that the wealthier nations are likely to trade in the Bangladeshi leather sector. But the key problem in the ways of trade is the presence of high trade and transport costs. Among the major causes of high-trade costs in Bangladesh are the cumbersome and complex cross-border trading practices, which also increase the possibility of corruption. Moreover, the trading of leather products is negatively influenced by the COVID-19. These problems and issues need to be addressed to facilitate Bangladesh’s leather exports. Also, Bangladesh is a founding member of China’s Belt and Road Initiative (BRI). Exporting to Chinese consumer markets and using network connectivity to boost leather trade with other participating countries in the BRI would create a considerable growth potential for Bangladesh. To this end, the issue of technological developments and research innovations could be prioritized. This work provides both industrial and policy directions for future research on trade of leather products by means of an application of the gravity model. There are some methodological innovations of the model. The concluding remarks have generated some insights and lessons that would be useful in the development of leather trade across the world.

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“…The flow of trade is expected to be positively related to the size of the market and the consumption of the countries, but inversely linked to the distance between trading countries. Subsequent empirical studies have introduced additional variables that complement the simpler gravity model, allowing for the analysis of the influence of artificial barriers to international trade [53][54][55]. Based on the arguments presented here, the following equation is tested:…”

Section: Panel Data Analysismentioning

confidence: 99%

Globalization versus Regionalization in Agri-Food Exports from Spain and Portugal

Moral-Pajares,

Zozaya-Montes,

Gallego-Valero

2024

Agriculture

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Spain and Portugal, two countries located in southern Europe, share a significant export specialization in agricultural and agri-food products compared to the EU-27 as a whole. Based on arguments drawn from the literature and information provided by Eurostat, this paper first identifies the characteristics of the dynamics of sales of agri-food products in the international market for the two Iberian Peninsula economies between 2008 and 2022, a period marked by the introduction of restrictions on foreign trade flows worldwide. Secondly, using panel data methodology, it examines how imports by EU-27 partners influence this trajectory. The results confirm the strengthening of export specialization in these two countries, which sell a wide variety of agri-food products in international markets. Additionally, in the case of Spain, the estimated concentration indices show a spatial diversification process towards new destinations. In both economies, however, the EU-27 market, characterized by strong competition and low development expectations, continues to influence export trends in the short and medium terms. Consequently, institutions and companies in the sector must adopt a more dynamic approach and implement actions aimed at facilitating access to new export destinations and consolidating business there. Thus, an increasing share of their exports should be reoriented towards markets with higher demand growth, helping to reinforce the global competitiveness of the national agri-food sector. This research contributes to the scientific literature on the medium- and long-term effects of economic integration processes on the exports of agri-food products of member countries.

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The gravity model of trade

Cited by 25 publications

References 78 publications

Empirical Analysis of Factors Affecting the Bilateral Trade between Mongolia and China

Empirical Analysis of Factors Affecting the Bilateral Trade between Mongolia and China

Determinants of Bangladesh’s Leather Exports to Its Major Trade Partners: A Panel Gravity Model Approach

Globalization versus Regionalization in Agri-Food Exports from Spain and Portugal

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