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Measuring Trade and Trade Potential : A Survey

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  • Shiro Armstrong

    (ANU)

Abstract

This paper provides a survey and a brief critical review of the literature on the widely used gravity models of trade, as a prelude to the justification of its use with the stochastic frontier methodology. The important papers on the theoretical foundations of the gravity model are reviewed and related to papers applied to explain determinants of trade flows. Then some shortcomings of the gravity model are discussed. The paper introduces the stochastic frontier gravity model as a way of estimating trade resistances and overcoming some of the shortcomings of conventional gravity models in their use for that purpose.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 21904.

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Date of creation: Jan 2007
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Handle: RePEc:eab:tradew:21904

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
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References

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  1. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
  2. James Harrigan, 2001. "Specialization and the volume of trade: do the data obey the laws?," Staff Reports 140, Federal Reserve Bank of New York.
  3. 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.
  4. Drysdale, Peter & Garnaut, Ross, 1982. "Trade Intensities and the Analysis of Bilateral Trade Flows in a Many-Country World : A Survey," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 22(2), pages 62-84, February.
  5. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  6. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  7. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, 02.
  8. K. Kalirajan, 1999. "Stochastic varying coefficients gravity model: An application in trade analysis," Journal of Applied Statistics, Taylor & Francis Journals, vol. 26(2), pages 185-193.
  9. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  10. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  11. 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.
  12. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, 09.
  13. Peter Drysdale & Xinpeng Xu, 2004. "Taiwan's Role in the Economic Architecture of East Asia and the Pacific," Asia Pacific Economic Papers 343, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  14. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
  15. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
  16. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  17. 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.
  18. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Augmented gravity model: An empirical application to Mercosur- European trade flows," International Trade 0309019, EconWPA.
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Citations

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Cited by:
  1. Shiro Armstrong & Peter Drysdale & Kaliappa Kalirajan, 2008. "Asian Trade Structures and Trade Potential : An Initial Analysis of South and East Asian Trade," EABER Working Papers 21753, East Asian Bureau of Economic Research.
  2. Miran, Bülent & Atış, Ela & Bektaş, Zerrin & Salalı, Ece & Cankurt, Murat, 2013. "An Analysis of International Raisin Trade: A Gravity Model Approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152200, Australian Agricultural and Resource Economics Society.
  3. Zwinkels, Remco C.J. & Beugelsdijk, Sjoerd, 2010. "Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?," International Business Review, Elsevier, vol. 19(1), pages 102-115, February.
  4. Johan Fourie & Maria Santana-Gallego, 2011. "The Determinants of African Tourism," Working Papers 260, Economic Research Southern Africa.
  5. Shiro Armstrong, 2010. "Taiwan's Asia Pacific Economic Strategies Post-ECFA," EABER Working Papers 22810, East Asian Bureau of Economic Research.

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