The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?
AbstractIn this paper, we address the problem of the role of the distance between trading partners by assuming the variability of coefficients in a standard gravity model. The distance can be interpreted as an indicator of the cost of entry in a market (a fixed cost): the greater the distance, the higher the entry cost, and the more we need to have a large market to be able to cover a high cost of entry. To explore this idea, the paper uses a method called Flexible Least Squares. By allowing the parameters of the gravity model to vary over the observations, our main result is that the more the partner's GDP is large, the less the distance is an obstacle to trade.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 2 ()
Contact details of provider:
Gravity Equation; Flexible Least Squares; Geographical Distance;
Other versions of this item:
- Vêlayoudom Marimoutou & Denis Peguin & Anne Peguin-Feissolle, 2009. "The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?," Post-Print hal-00389570, HAL.
- Vêlayoudom Marimoutou & Denis Peguin & Anne Peguin-Feissolle, 2010. "The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?," Working Papers halshs-00536127, HAL.
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Howard J. Wall, 1999. "Using the gravity model to estimate the costs of protection," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 33-40.
- Tesfatsion, Leigh S. & Veitch, J., 1990.
"U.S. Money Demand Instability: A Flexible Least Squares Approach,"
Staff General Research Papers
11193, Iowa State University, Department of Economics.
- Tesfatsion, Leigh & Veitch, John M., 1990. "U.S. money demand instability A flexible least squares approach," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 14(1), pages 151-173, February.
- Tesfatsion, L. & Veitch, J., 1988. "U.S. Money Demand Instability: A Flexible Least Squares Approach," Papers, Southern California - Department of Economics m8809, Southern California - Department of Economics.
- Robert Kalaba & Leigh Tesfatsion, 1995.
"A Multicriteria Approach to Model Specification and Estimation,"
- Kalaba, Robert & Tesfatsion, Leigh, 1996. "A multicriteria approach to model specification and estimation," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 21(2), pages 193-214, February.
- Kalaba, Robert E. & Tesfatsion, Leigh S., 1996. "A Multicriteria Approach to Model Specification and Estimation," Staff General Research Papers 1684, Iowa State University, Department of Economics.
- Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
- Kalaba, Robert E. & Tesfatsion, Leigh S., 1990. "Flexible Least Squares for Approximately Linear Systems," Staff General Research Papers 11190, Iowa State University, Department of Economics.
- James E. Anderson, 2011.
"The Gravity Model,"
Annual Review of Economics, Annual Reviews,
Annual Reviews, vol. 3(1), pages 133-160, 09.
- Jonathan Eaton & Samuel Kortum, 1997.
"Technology and Bilateral Trade,"
Boston University - Institute for Economic Development, Boston University, Institute for Economic Development
79, Boston University, Institute for Economic Development.
- Simon J. Evenett & Wolfgang Keller, 1996.
"On Theories Explaining the Success of the Gravity Equation,"
International Trade, EconWPA
9608001, EconWPA, revised 13 Jun 1997.
- Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(2), pages 281-316, April.
- Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc.
- Lutkepohl, Helmut & Herwartz, Helmut, 1996. "Specification of varying coefficient time series models via generalized flexible least squares," Journal of Econometrics, Elsevier, Elsevier, vol. 70(1), pages 261-290, January.
- Dorfman, Jeffrey H. & Foster, Kenneth A., 1991. "Estimating Productivity Changes With Flexible Coeficients," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(02), December.
- Feenstra, Robert & Markusen, James R. & Rose, Andrew K, 1998.
"Understanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods,"
CEPR Discussion Papers
2035, C.E.P.R. Discussion Papers.
- Robert C. Feenstra & James A. Markusen & Andrew K. Rose, 1998. "Undertstanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods," NBER Working Papers 6804, National Bureau of Economic Research, Inc.
- Leamer, Edward E., 1993.
"U.S. manufacturing and an emerging Mexico,"
The North American Journal of Economics and Finance,
Elsevier, vol. 4(1), pages 51-89.
- Chauveau, T. & Maillet, B., 1998. "Flexible Least Squares Betas: The French Market Case," Papers, Caisse des Depots et Consignations - Cahiers de recherche 1998-03/fi, Caisse des Depots et Consignations - Cahiers de recherche.
- Ploberger, Werner & Kramer, Walter & Kontrus, Karl, 1989. "A new test for structural stability in the linear regression model," Journal of Econometrics, Elsevier, Elsevier, vol. 40(2), pages 307-318, February.
- Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-11, December.
- Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
- Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.