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Gravity Model of International Trade, Its Variables, Assumptions, Problems and Applications
[Gravitační model mezinárodní směny, jeho proměnné, předpoklady, problémy a aplikace]

Author

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  • Petra Bubáková

Abstract

The paper deals with the issues of gravity models applied in the field of trade flow analysis. Applied variables, assumptions of their impacts, problems of gravity equations and their resolving (namely the endogeneity problem, the heterogeneity problem, and the identification problem) are defined in this paper. The paper provides a detailed overview of selected gravity model publications in scientific papers with an impact factor since 2000. According to the document analysis, it is clear that panel data are the most commonly used type of data in the 21st century. Fixed effects models are recommended. The choice of variables depends on the subject being examined and on the aim of the analysis. Correct model specification and inclusion of relevant variables are highly important. The results were elaborated as part of the research project IGA 20121050 "Spatial regional market integration with agricultural raw materials".

Suggested Citation

  • Petra Bubáková, 2013. "Gravity Model of International Trade, Its Variables, Assumptions, Problems and Applications [Gravitační model mezinárodní směny, jeho proměnné, předpoklady, problémy a aplikace]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(2), pages 3-24.
    • Handle: RePEc:prg:jnlaop:v:2013:y:2013:i:2:id:396:p:3-24
    DOI: 10.18267/j.aop.396
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    More about this item

    Keywords

    Gravity model; trade flows; assumption of variables; endogeneity problem; heterogeneity problem; identification problem; panel models;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F10 - International Economics - - Trade - - - General
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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