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The Gravity Equation in International Trade

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  • Michele FRATIANNI

    () (Indiana University, Graduate School of Business Bloomington)

Abstract

This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was "legitimized" by a series of theoretical articles that demonstrated that the basic GE form was consistent with various models of trade flows. Empirical applications of GE expanded to cover a variety of issues, such as the impact of regional trade agreements, national borders and currency unions on trade, as well as the use of the equation to sort out the relative merit of alternative trade theories. A new wave of studies is now concentrating on the general equilibrium properties of the GE and finer econometrics points. The renewed interest of the academic profession in the development of the GE is undoubtedly driven by the equation's empirical success.

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Bibliographic Info

Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 307.

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Length: 33
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:anc:wpaper:307

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Keywords: borders; currency unions; gravity equation; regional trade agreement; trade theories;

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  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  2. repec:att:wimass:9713 is not listed on IDEAS
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  4. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
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  10. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 433-462, October.
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Citations

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Cited by:
  1. Giorgio Fagiolo, 2010. "The international-trade network: gravity equations and topological properties," Journal of Economic Interaction and Coordination, Springer, vol. 5(1), pages 1-25, June.
  2. Michele Fratianni & Francesco Marchionne, 2011. "Trade Costs and Economic Development," Mo.Fi.R. Working Papers 54, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Chang Hoon Oh & Michele Fratianni, 2010. "Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?," Mo.Fi.R. Working Papers 43, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  4. Subhani, Dr. Muhammad Imtiaz, 2009. "Bilateral trade: a study on SAARC countries," MPRA Paper 36158, University Library of Munich, Germany.
  5. Michele Fratianni & Francesco Marchionne, 2009. "The Limits to Integration," Mo.Fi.R. Working Papers 20, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  6. Ugo FRATESI, 2010. "The National and International Effects;of Regional Policy Choices: Agglomeration Economies, Peripherality and Territorial Characteristics," Working Papers 344, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  7. Luca RICCETTI, 2011. "A Copula-GARCH Model for Macro Asset Allocation of a Portfolio with Commodities: an Out-of-Sample Analysis," Working Papers 355, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  8. Fabio FIORILLO & Agnese SACCHI, 2010. "I Want to Free-ride. An Opportunistic View on Decentralization Versus Centralization Problem," Working Papers 346, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  9. Jaume Roselló Nadal & María Santana Gallego, 2012. "Climate change and global international tourism: An evaluation for different scenarios," DEA Working Papers 52, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  10. Johan Fourie & Maria Santana-Gallego, 2011. "The Determinants of African Tourism," Working Papers 260, Economic Research Southern Africa.
  11. Shehata, Emad Abd Elmessih, 2011. "الآثار الإقتصادية للتجارة الخارجية بين مصر والكوميسا بإستخدام نموذج الجاذبية للتحليل المكانى
    [Economic Impact for Tr    ," MPRA Paper 43395, University Library of Munich, Germany, revised Dec 2011.
  12. Martin Falk, 2012. "Determinants of Greenfield Investment in Knowledge Intensive Business Services," FIW Research Reports series IV-002, FIW.
  13. Luca RICCETTI, 2010. "Minimum Tracking Error Volatility," Working Papers 340, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  14. Marco Duenas & Giorgio Fagiolo, 2011. "Modeling the International-Trade Network: A Gravity Approach," Papers 1112.2867, arXiv.org.

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