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Trade Flows and Spatial Effects: The Gravity Model Revisited

  • A. Porojan
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    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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    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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    1. 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.
    2. 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.
    3. 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.
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    5. 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.
    6. 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.
    7. 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.
    8. Simon J. Evenett & Wolfgang Keller, 1996. "On Theories Explaining the Success of the Gravity Equation," International Trade 9608001, EconWPA, revised 13 Jun 1997.
    9. 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.
    10. 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.
    11. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
    12. Lionel Fontagné & Michael Freudenberg & Michaël Pajot, 1999. "Le potentiel d'échanges entre l'Union européenne et les PECO. Un réexamen," Revue Économique, Programme National Persée, vol. 50(6), pages 1139-1168.
    13. 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.
    14. 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.
    15. Carlos M. Asilis & Luis Rivera-Batiz, 1994. "Geography, Trade Patterns, and Economic Policy," IMF Working Papers 94/16, International Monetary Fund.
    16. 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.
    17. Edward E. Leamer, 1992. "Testing Trade Theory," NBER Working Papers 3957, National Bureau of Economic Research, Inc.
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