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Distance and border effects in international trade: A comparison of estimation methods

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  • Magerman, Glenn
  • Studnicka, Zuzanna
  • Van Hove, Jan

Abstract

This paper compares various estimation methods often used in the estimation of gravity models of international trade. The authors first discuss different structural and consistent estimation techniques, their underlying assumptions and their impact on estimated coefficients. They then estimate the gravity model for global bilateral trade flows using various empirical methodologies. They focus on a comparison of the distance and border effects across estimation techniques. For the border effects they take into account adjacency effects as well as the distinction between intra-regional and inter-regional trade. Their findings confirm the significantly negative distance and the significantly positive adjacency effect across estimation methods, although the size of the effects varies substantially across methods. The border effects by global regions are much more sensitive - both in size and direction - to the applied estimation method. Although all estimation methods have their own merits and drawbacks, the authors provide some guidelines for future empirical research based on their findings.

Suggested Citation

  • Magerman, Glenn & Studnicka, Zuzanna & Van Hove, Jan, 2016. "Distance and border effects in international trade: A comparison of estimation methods," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 10, pages 1-31.
  • Handle: RePEc:zbw:ifweej:201618
    DOI: 10.5018/economics-ejournal.ja.2016-18
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    2. Rasoulinezhad, Ehsan, 2020. "Energy Trade and Economic Integration between the Commonwealth Independent States and China," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(1), pages 172-190.
    3. Willert, Bianca, 2017. "How intermediates trade affects the formation of free trade agreements: A study analyzing pairwise trade flows of 70 countries," Thuenen-Series of Applied Economic Theory 147, University of Rostock, Institute of Economics.
    4. Bulawayo, Maio & Mudenda, Dale & Ndulo, Manenga & Simwanza, Charles, 2020. "Does Immigration Stimulate Non-Traditional Exports? Evidence from Zambia," African Journal of Economic Review, African Journal of Economic Review, vol. 8(3), November.
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    6. Mancal, A. & Barros, G., 2018. "Determinants of West African international agricultural trade," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277203, International Association of Agricultural Economists.

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    More about this item

    Keywords

    gravity model; empirical estimation; distance effect; border effect;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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