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Trade Flows and Spatial Effects: The Gravity Model Revisited

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  • A. Porojan
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    Abstract

    This article revisits the popular gravity model of trade in light of the increasingly acknowledged findings of spatial econometrics and interprets the results in view of some recent theoretical developments from the economic literature that contribute to its foundation. When the inherent spatial effects are explicitly taken into account, the magnitude of the estimated parameters changes considerably and, with it, the measures on the predicted trade flows. This result is illustrated for the case of predicted trade flows between the European Union and some of its potential members. Copyright Kluwer Academic Publishers 2001

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    File URL: http://hdl.handle.net/10.1023/A:1011129422190
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 12 (2001)
    Issue (Month): 3 (July)
    Pages: 265-280

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    Handle: RePEc:kap:openec:v:12:y:2001:i:3:p:265-280

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: spatial econometrics; trade forecasting; gravity model;

    References

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    1. Michael Freudenberg & Michaël Pajot & Lionel Fontagné, 1999. "Le potentiel d'échanges entre l'Union européenne et les PECO. Un réexamen," Revue économique, Presses de Sciences-Po, vol. 0(6), pages 1139-1168.
    2. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    3. Simon J. Evenett & Wolfgang Keller, 1996. "On Theories Explaining the Success of the Gravity Equation," International Trade 9608001, EconWPA, revised 13 Jun 1997.
    4. Byers, D.A. & Iscan, T.B. & Lesser, B., 1998. "New Borders and Trade Flows: a Gravity Model Analysis of the Baltic States," Department of Economics at Dalhousie University working papers archive 98-04, Dalhousie, Department of Economics.
    5. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
    6. Edward E. Leamer, 1992. "Testing Trade Theory," NBER Working Papers 3957, National Bureau of Economic Research, Inc.
    7. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
    8. Brada, Josef C & Mendez, Jose A, 1985. "Economic Integration among Developed, Developing and Centrally Planned Economies: A Comparative Analysis," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 549-56, November.
    9. Carlos M. Asilis & Luis Rivera-Batiz, 1994. "Geography, Trade Patterns, and Economic Policy," IMF Working Papers 94/16, International Monetary Fund.
    10. Bolduc, Denis & Laferriere, Richard & Santarossa, Gino, 1992. "Spatial autoregressive error components in travel flow models," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 371-385, September.
    11. T J Fik & G F Mulligan, 1998. "Functional form and spatial interaction models," Environment and Planning A, Pion Ltd, London, vol. 30(8), pages 1497-1507, August.
    12. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 1996. "Infrastructure, Transport Costs and Trade," Keele Department of Economics Discussion Papers (1995-2001) 96/7, Department of Economics, Keele University.
    13. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
    14. Jeffrey A. Frankel & Shang-Jin Wei, 1998. "Regionalization of World Trade and Currencies: Economics and Politics," NBER Chapters, in: The Regionalization of the World Economy, pages 189-226 National Bureau of Economic Research, Inc.
    15. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    16. Marius Brülhart & Mary Kelly, 1998. "Ireland's Trading Potential with Central and Eastern European Countries: A Gravity Study," Economics Technical Papers 9815, Trinity College Dublin, Department of Economics.
    17. Darren Byers & Talan IÅŸcan & Barry Lesser, 2000. "New Borders and Trade Flows: A Gravity Model Analysis of the Baltic States," Open Economies Review, Springer, vol. 11(1), pages 73-91, January.
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    Citations

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    Cited by:
    1. Hayakawa, Kazunobu & JI, Zheng & Obashi, Ayako, 2009. "Agglomeration versus Fragmentation:A Comparison of East Asia and Europe," IDE Discussion Papers 212, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    2. Angulo, A. M. & Mtimet, N. & Dhehibi, B. & Atwi, M. & Ben Youssef , O. & Gil, J. M. & Sai, M. B., 2011. "A revisited gravity equation in trade flow analysis: an application to the case of Tunisian olive oil exports," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 21, pages 225-239.
    3. Ron Johnston & Les Hepple & Tony Hoare & Kelvyn Jones & Paul Plummer, 2003. "The Mistreated Model: Some Technical Comments on Porojan's Paper on 'Trade Flows and Spatial Effects'," Open Economies Review, Springer, vol. 14(1), pages 11-14, January.
    4. Reinhold Kosfeld & Hans-Friedrich Eckey, 2008. "Market Access, Regional Price Level and Wage Disparities: The German Case," MAGKS Papers on Economics 200814, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Kiyong Keum, 2010. "Tourism flows and trade theory: a panel data analysis with the gravity model," The Annals of Regional Science, Springer, vol. 44(3), pages 541-557, June.
    6. Karel Janda & Eva Michalíková & Věra Potácelová, 2010. "Gravity and Fiscal Models of Government Support of Export Credit in the Czech Republic," Politická ekonomie, University of Economics, Prague, vol. 2010(3), pages 305-325.
    7. Anca Carrington, 2003. "The Mistreated Model: A Reply," Open Economies Review, Springer, vol. 14(1), pages 15-17, January.
    8. LeSage, James P. & Polasek, Wolfgang, 2006. "Incorporating Transportation Network Structure in Spatial Econometric Models of Commodity Flows," Economics Series 188, Institute for Advanced Studies.
    9. Ming-Long Lee & R. Kelley Pace, 2005. "Spatial Distribution of Retail Sales," The Journal of Real Estate Finance and Economics, Springer, vol. 31(1), pages 53-69, August.
    10. Minfeng Deng & George Athanasopoulos, 2009. "Modelling Australian Domestic and International Inbound Travel: a Spatial-Temporal Approach," Monash Econometrics and Business Statistics Working Papers 10/09, Monash University, Department of Econometrics and Business Statistics.
    11. repec:dgr:uvatin:2011136 is not listed on IDEAS
    12. Sandberg, H. Mikael & Taylor, Timothy G. & Seale, James L., Jr., 2002. "CARICOM Bilateral Trade: A Preliminary Analysis Using the Gravity Model," Technical Papers 15636, University of Florida, International Agricultural Trade and Policy Center.
    13. Masood Gheasi & Peter Nijkamp & Piet Rietveld, 2011. "Migration and Foreign Direct Investment: Education Matters," Tinbergen Institute Discussion Papers 11-136/3, Tinbergen Institute.
    14. Giuseppe Ricciardo Lamonica & Barbara Zagaglia, 2013. "The determinants of internal mobility in Italy, 1995-2006," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(16), pages 407-440, September.

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