Trade Agreements and Latin American Trade (Creation and Diversion) and Welfare

Abstract

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On the role of domestic trade flows for estimating the gravity model of trade

“…6 6 Two alternative methods to construct domestic trade flows for gravity estimations are to use GDP data (El Dahrawy & Timini, Forthcoming; Timini & Viani, 2020; Yotov, 2012) or to rely in input–output (I–O) linkages (Felbermayr et al, 2018; Felbermayr & Steininger, 2019; Larch et al, 2018). The main advantages of using gross production data over GDP data are (i) that this is consistent with the data on exports, which are also reported on a gross basis, and (ii) that this allows for construction of sectoral domestic trade flows.…”