International trade and the gravity model: recent evidence in theoretical and empirical analysis
Keywords:
gravity model, international trade, theoretical foundation
Abstract
Despite the solid theoretical foundations and the empirical success of the gravitational model, it was/is used without foundation and taking into account the econometric challenges that can generate skewed and inconsistent. Therefore, this work presents a broad theoretical review of the model and demonstrates its application in the manner recommended by the specialized literature. It should be noted that: 1) Intranational trade data must be included; 2) Fixed effects of countries each year must be predicted; 3) Fixed effects of country pairs must also be adopted, and; 4) The Poisson Pseudo Maximum Likelihood estimator must be used. For example, a regression was estimated verifying the impact of nations' economic freedom on their exports. The results showed that there is a positive relationship between those. Finally, it is expected that the present work will serve as an instrument for several researches, generating new evidence and directing more efficient commercial policies.
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References
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ANDERSON, J. E. A Theoretical Foundation for the Gravity Equation. American Economic Review, v. 69, n. 1, 1979.
ANDERSON, J. E. AND VAN WINCOOP, E. Gravity with Gravitas: A Solution to the Border Puzzle. American Economic Review, v. 93, n. 1, 2003.
ANDERSON, J. E.; YOTOV, Y. V. Terms of trade and global efficiency effects of free trade agreements, 1990-2002. Journal of International Economics, v. 99, p. 279–298, 1 mar. 2016.
BACCHETTA, MARC. ET AL. A Practical Guide to Trade Policy Analysis. [s.l.] WTO, 2012.
BAIER, S. L.; BERGSTRAND, J. H. Estimating the effects of free trade agreements on international trade flows using matching econometrics. Journal of International Economics, v. 77, n. 1, p. 63–76, 2009.
BALDWIN, R.; TAGLIONI, D. Gravity for Dummies and Dummies for Gravity Equations: NBER WORKING PAPER SERIES. [s.l: s.n.]. Disponível em:
BORCHERT, I., LARCH, M., SHIKHER, S., AND YOTOV, Y. The International Trade and Production Database for Estimation (ITPD-E). Disponível em:
CORREIA, S.; GUIMARÃES, P.; ZYLKIN, T. Z. Fast Poisson estimation with high-dimensional fixed effects. Stata Journal, v. 20, n. 1, p. 95–115, 2020.
DEARDORFF, A. V. Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World? In: JEFFREY A. FRANKEL (Ed.). . The Regionalization of the World Economy. [s.l.] University of Chicago Press, 1998.
DEPKEN, C. A.; SONORA, R. J. Asymmetric Effects of Economic Freedom on International Trade Flows. International Journal of Business and Economics, v. 4, n. 2, p. 141–155, 2005.
FEENSTRA, R. C. Advanced International Trade: Theory and Evidence. [s.l.] Princeton university press, 2004.
GOPINATH, M.; BATARSEH, F. A.; BECKMAN, J. Machine Learning in gravity models: an application to agricultural trade: NBER WORKING PAPER SERIES. Cambridge, MA: [s.n.]. Disponível em:
GOURIEROUX, C.; MONFORT, A.; TROGNON, A. Pseudo Maximum Likelihood Methods: Theory. Econometrica, v. 52, n. 3, p. 681, maio 1984.
HEAD, K.; MAYER, T. Gravity Equations: Workhorse,Toolkit, and Cookbook. In: Handbook of International Economics. [s.l.] Elsevier B.V., 2014. v. 4p. 131–195.
HEID, B.; LARCH, M.; YOTOV, Y. Estimating the Effects of Non-discriminatory Trade Policies within Structural Gravity ModelsDrexel University Working Paper Series. [s.l: s.n.].
HUMMELS, D. L. Toward a Geography of Trade Costs. Purdue University. 54 p. 2001.
KOX, H. L. M.; ROJAS-ROMAGOSA, H. How trade and investment agreements affect bilateral foreign direct investment: Results from a structural gravity model. World Economy, n. March, p. 1–40, 2020.
NAANWAAB, C.; DIARRASSOUBA, M. The impact of economic freedom on bilateral trade: A cross-country analysis. International Journal of Business Management and Economic Research, v. 4, n. 1, p. 668–672, 2013.
NUNN, N. Relationship-specificity, incomplete contracts, and the pattern of trade. The Quarterly Journal of Economics, Vol. 122 No. 2, pp. 569-600, 2007.
OLIVERO, MARÍA PÍA; YOTOV, Y. Dynamic Gravity: Endogenous Country Size and Asset Accumulatio. Canadian Journal of Economics, v. 45, n. 1, 2012.
PIERMARTINI, R.; YOTOV, Y. V. Estimating Trade Policy Effects with Structural GravityCESIFO WORKING PAPERS: CESIFO WORKING PAPER. [s.l: s.n.]. Disponível em:
RABELO, A. O que é machine learning? Entenda essa tendência no marketing digital! Disponível em:
RANJAN, P.; LEE, J.Y. Contract enforcement and international trade. Economics and Politics, Vol. 19 No. 2, pp. 191-218, 2007.
RODRIK, D.; SUBRAMANIAN, A.; TREBBI, F. Institutions rule: the primacy of institutions over geography and integration in economic development. Journal of Economic Growth, Vol. 9 No. 2, pp. 131-165, 2004.
SANTOS SILVA, J M C E TENREYRO, S. The log of Gravity. Review of Economics and Statistics, v. 88, n. November, p. 641–658, 2006.
SANTOS SILVA, J. M. C.; TENREYRO, S. Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator ✩. Economics Letters, v. 112, p. 220–222, 2011.
THE HERITAGE FOUNDATION. Index of Economic Freedom. Disponível em:
TINBERGEN, J. Shaping the world economy: suggestions for an international economic policy. [s.l.] New York: Twentieth Century Fund, 1962.
VEALL, M. R.; ZIMMERMANN, K. F. Pseudo-R2 measures for some common limited dependent variable models. Journal of Economic Surveys, v. 10, n. 3, p. 241–259, 1 set. 1996.
VEENHOVEN, R. Freedom and Happiness: A comparative study in 46 nations in the Early 1990´s. In: Diener, E. & E.M. Culture and subjective well-being. MIT press, Cambridge, MA USA, 2000.
YOTOV, Y. V. et al. An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model. [s.l.] UNCTAD, 2016.
Published
2021-12-12
How to Cite
Ferreira, C. R. C. (2021). International trade and the gravity model: recent evidence in theoretical and empirical analysis. A Economia Em Revista - AERE, 29(1), 1-13. Retrieved from https://periodicos.uem.br/ojs/index.php/EconRev/article/view/58335
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Artigos
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