The gravity model for rice exports: The cases of India and Thailand

This paper investigates the determinants of the rice exports of India and Thailand using the gravity model and tests the addition of new variables: the relative price of rice exports to the world price, dummy variables to explain the effects of eighteen regions, four income-level groups, and regional and country free trade agreements. Country-specific fixed effects Poisson Pseudo Maximum Likelihood and Poisson Maximum Likelihood methods were adopted to deal with endogeneity from omitted relevant explanatory variables. The results indicate that Thailand's rice exports are more sensitive to price than are those of India. Thailand's rice is a necessary good, while India's rice is a neutral good. Thailand's real GDP has a negative effect on its rice exports, but this is not so for India. Thailand's and India's population have a positive effect on their rice exports. India's partner's population has a negative effect, but this is not the case for Thailand. Countries in upper-middle income and high-income classes import India's rice more than those in low and lower-middle income classes. Thailand's rice exports to low, lower-middle, and upper-middle income classes are greater than to the high-income class. Not all free trade agreements benefit the rice exports of India and Thailand.