The Estimation of Gravity Models in International Trade

2017 ◽  
pp. 323-348 ◽  
Author(s):  
Badi H. Baltagi ◽  
Peter H. Egger ◽  
Katharina Erhardt
Keyword(s):  
International Trade ◽  
Gravity Models

Gravity Models in International Trade: An Exploration in Econo-Physics

2021 ◽  
pp. 227797872198992
Author(s):  
Iman Pal ◽  
Saibal Kar
Keyword(s):  
Pattern Recognition ◽  
International Trade ◽  
Present Article ◽  
Gravity Models ◽  
Scientific Applications ◽  
Physical Sciences ◽  
Trade Patterns ◽  
Pattern Recognition Techniques ◽  
The Subject ◽  
Jel Classifications

Several strands of the static and dynamic theoretical constructs and the empirical applications in the subject of economics owe substantially to the well-known principles of physical sciences. The present article explores as to how the development of the popular gravity models in international trade can be traced back to Newton’s law of gravitation, and to both Ohm’s Law and Kirchhoff’s Law of current electricity, as well as to the pattern recognition techniques commonly deployed in scientific applications. In addition to surveying these theoretical analogies, the article also offers numerical applications for observed trade patterns between India and a set of countries. JEL Classifications: F41, F42, C61, F47

scholarly journals Nonparametric Counterfactual Predictions in Neoclassical Models of International Trade

2017 ◽  
Vol 107 (3) ◽  
pp. 633-689 ◽  
Author(s):  
Rodrigo Adao ◽  
Arnaud Costinot ◽  
Dave Donaldson
Keyword(s):  
International Trade ◽  
World Economy ◽  
Functional Form ◽  
Sufficient Conditions ◽  
Gravity Models ◽  
Demand System ◽  
Factor Demand ◽  
The World ◽  
Potential Benefits ◽  
Arbitrary Change

We develop a methodology to construct nonparametric counterfactual predictions, free of functional form restrictions on preferences and technology, in neoclassical models of international trade. First, we establish the equivalence between such models and reduced exchange models in which countries directly exchange factor services. This equivalence implies that, for an arbitrary change in trade costs, counterfactual changes in the factor content of trade, factor prices, and welfare only depend on the shape of a reduced factor demand system. Second, we provide sufficient conditions under which estimates of this system can be recovered nonparametrically. Together, these results offer a strict generalization of the parametric approach used in so-called gravity models. Finally, we use China's recent integration into the world economy to illustrate the feasibility and potential benefits of our approach. (JEL C51, D51, F11, F14, O19, P33)

Gravity's Rainbow: A dynamic latent space model for the world trade network

2013 ◽  
Vol 1 (1) ◽  
pp. 95-118 ◽  
Author(s):  
MICHAEL D. WARD ◽  
JOHN S. AHLQUIST ◽  
ARTURAS ROZENAS
Keyword(s):  
International Trade ◽  
Gravity Model ◽  
Bilateral Trade ◽  
Directed Graphs ◽  
Gravity Models ◽  
Model Specification ◽  
Trade Data ◽  
Latent Space ◽  
Out Of Sample ◽  
The Usa

AbstractThe gravity model, long the empirical workhorse for modeling international trade, ignores network dependencies in bilateral trade data, instead assuming that dyadic trade is independent, conditional on a hierarchy of covariates over country, time, and dyad. We argue that there are theoretical as well as empirical reasons to expect network dependencies in international trade. Consequently, standard gravity models are empirically inadequate. We combine a gravity model specification with “latent space” networks to develop a dynamic mixture model for real-valued directed graphs. The model simultaneously incorporates network dependencies in both trade incidence and trade volumes. We estimate this model using bilateral trade data from 1990 to 2008. The model substantially outperforms standard accounts in terms of both in- and out-of-sample predictive heuristics. We illustrate the model's usefulness by tracking trading propensities between the USA and China.

scholarly journals Does ICT Development Flatten the Globe? Evidence from International Trade Costs Data

2016 ◽  
Vol 3 (2) ◽  
pp. 39-46
Author(s):  
Moussa Keita
Keyword(s):  
International Trade ◽  
Bilateral Trade ◽  
Random Effect ◽  
Trade Costs ◽  
Gravity Models ◽  
Beneficial Effects ◽  
Extended Gravity ◽  
Variable Approach ◽  
Trading Partners ◽  
The Impact

This study attempts to bring new perspectives on the death of distance hypothesis by examining to what extent the intensification of ICT has contributed to attenuate the effect of distance on international trade issues. Our analysis is based on an extended gravity model constituted of 2827 country pairs observed from 2002 to 2012. The model is estimated by using the Hausman-Taylor instrumental variable approach to deal with specificities of the panel gravity models that cannot be treated in classical fixed-effect or random-effect models. The estimations confirm significant beneficial effects of ICT regarding trade costs reduction. We found that bilateral trade costs are significantly low between countries that have a more densified communication network. And this effect appears to be strongly heterogeneous regarding the distance. In particular, we found that the impact of ICT on trade costs is greater when the distance between the trading partners is more important. We also found that the elasticity of trade costs to distance decreases as the level of ICT increases. These results appear robust to various sensitivity and robustness checks and are consistent with other studies. Finally, the results obtained in this study suggest the existence of strong distance-neutralizing effect of ICT. JEL Classifications Code: F14 ; O33

scholarly journals Panel Data Gravity Models of International Trade

2014 ◽  
Author(s):  
Badi H. Baltagi ◽  
Peter H. Egger ◽  
Michael Pfaffermayr
Keyword(s):  
International Trade ◽  
Panel Data ◽  
Gravity Models

Gravity Models and Empirical Trade

2020 ◽  
Author(s):  
Scott Baier ◽  
Samuel Standaert
Keyword(s):  
International Trade ◽  
Market Structure ◽  
Gravity Model ◽  
Empirical Work ◽  
Gravity Models ◽  
Estimation Methods ◽  
Intuitive Appeal ◽  
Empirical Trade ◽  
Trade Frictions ◽  
Theoretical Developments

The gravity model of international trade states that the volume of trade between two countries is proportional to their economic mass and a measure of their relative trade frictions. Perhaps because of its intuitive appeal, the gravity model has been the workhorse model of international trade for more than 50 years. While the initial empirical work using the gravity model lacked sound theoretical underpinnings, the theoretical developments have highlighted how a gravity-like specification can be derived from many models with varying assumptions about preferences, technology, and market structure. Along the strengthening of the theoretical roots of the gravity model, the way in which it is estimated has also evolved significantly since the start of the new millennium. Depending on the exact characteristics of regression, different estimation methods should be used to estimate the gravity model.

Gravity models in international trade analysis: testing the country similarity theory 50 years

2020 ◽  
pp. 52-62
Author(s):  
I.S. Smirnov
Keyword(s):  
Developing Countries ◽  
International Trade ◽  
Gravity Model ◽  
Similarity Theory ◽  
Market Competition ◽  
Gravity Models ◽  
Trade Data ◽  
Trade Relations ◽  
Similarity Factor ◽  
The Impact

The article assessed the potential use of gravity models to test the impact of various socio-geographical factors on international and inter-regional trade. The potential of gravitational modeling was estimated based on testing the theory of Linder’s Country similarity theory on recent trade data. This theory was one of the key theories of international trade in the post-war period. The classical gravity model of international trade can be used to test the change in the importance of the country similarity factor over a certain time period. The gravity model will demonstrate more significant results compared to its classical version (excluding the country similarity factor) in the case of a positive effect of the similarity factor on the volume of bilateral trade between countries. The analysis of recent trade data allowed us to assess the extent of change in the country similarity factor over the past 70 years. This period was accompanied by high growth in international trade, as well as the involvement of developing countries in the international division of labor. Vigorous market competition for the production of industrial goods led to the fact that manufacturers were forced to cut costs by moving their main production capacities to developing countries, which significantly differ from them in their level of economic development. The country similarity factor has lost its significance in this new system of international trade relations. As a result, at present the country similarity factor is not a key factor explaining the volume of trade relations between different countries.

scholarly journals Panel Data Gravity Models of International Trade

2015 ◽  
Author(s):  
Badi H. Baltagi ◽  
Badi H. Baltagi ◽  
Peter Egger ◽  
Michael Pfaffermayr
Keyword(s):  
International Trade ◽  
Panel Data ◽  
Gravity Models

The Role of Non-Market Factors in International Trade: A Case of Southern Africa

2017 ◽  
Vol 18 (2) ◽  
pp. 102-125
Author(s):  
Mikhail Grachev ◽  
Mariya Bobina
Keyword(s):  
International Trade ◽  
Cultural Distance ◽  
Geographic Distance ◽  
Gravity Models ◽  
Negative Effects ◽  
African Countries ◽  
Market Factors ◽  
The Impact ◽  
Cross National

This study examines the impacts of non-market factors on international trade in four regionally clustered African countries (Namibia, South Africa, Zambia, and Zimbabwe). It applies the concept of cross-national distance from international business and incorporates statistical and empirically generated data into the augmented gravity models of international trade to predict the impact of those non-market factors. The study reveals negative effects of geographic distance and positive or mixed cultural distance effects in these countries’ foreign trade flows. This paper also suggests useful implications to business scholars and practitioners.

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