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How serious is the omission of bilateral tariff rates in gravity?


  • Hayakawa, Kazunobu


This paper presents a constructed dataset of worldwide bilateral tariff rates to explore the seriousness of omitting bilateral tariff rates from gravity equations. Results indicate, first, that omitting bilateral tariff rates presents no serious issue related to the omitted variable bias because coefficients for the usual gravity variables remain unchanged before and after their inclusion. Second, the widely used dummy variable for regional trade agreements is not a statistical substitute for tariff rates because the coefficient for bilateral tariff rates remains significant even if it is included. Similarly, time-invariant pair fixed effects alongside time-variant importer and exporter fixed effects do not substitute statistically for omitted tariff rates.

Suggested Citation

  • Hayakawa, Kazunobu, 2013. "How serious is the omission of bilateral tariff rates in gravity?," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 81-94.
  • Handle: RePEc:eee:jjieco:v:27:y:2013:i:c:p:81-94 DOI: 10.1016/j.jjie.2013.01.002

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    References listed on IDEAS

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    Cited by:

    1. Pakasa Bary, 2015. "The Time-Varying Impact of Regional Trade Agreement: Evidence from ASEAN," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(9), pages 1061-1075, September.
    2. Kazunobu Hayakawa & Fukunari Kimura, 2015. "How Much Do Free Trade Agreements Reduce Impediments to Trade?," Open Economies Review, Springer, vol. 26(4), pages 711-729, September.
    3. Hayakawa, Kazunobu & Kimura, Fukunari, 2014. "How do free trade agreements reduce tariff rates and non-tariff barriers?," IDE Discussion Papers 446, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Lin, Chin-Ho, 2015. "The impact of tariff rates on the probability of trade relationships survival: evidence from ASEAN+6 manufactured goods," MPRA Paper 71260, University Library of Munich, Germany.

    More about this item


    Gravity equation; Tariff rates; Free trade agreement;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration


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