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Gravity Equation for Different Product Groups: A study at product level

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  • Thuy Nguyen

    () (Graduate Institute of International and Development Studies, Geneva, Switzerland)

  • Jean-Louis Arcand

    (Graduate Institute of International and Development Studies, Geneva, Switzerland)

Abstract

Do homogeneous and heterogeneous goods response the same way to changes in income and different measures of distance? Running country-fixed-effect gravity equation for different product groups, I find that homogeneous goods are less responsive to changes in income than heterogeneous goods. I also find that export volume of all product types is significantly hindered by geographical distance between countries. However, exports of homogeneous goods are not affected by social distance measures such as common language and colonial relationship, while exports of heterogeneous goods significantly improve if trading parties speak the same official language and have colonial relationship. Fixed effect quantile estimation (Koenker 2004) with bootstrapped standard errors confirms the above finding for income and geographical distance. Regarding two social distance measures, common language and colonial relationship, median quantile (Tobit) estimation suggests that common language does not have impact on exports of any product type, while colonial relationship significantly influences export of heterogeneous goods. At higher levels of quantiles the impact of common language increases for all product types, and even strongest on exports of homogeneous goods. Colonial relationship loses its impact as being evaluated at 90th percentile.

Suggested Citation

  • Thuy Nguyen & Jean-Louis Arcand, 2009. "Gravity Equation for Different Product Groups: A study at product level," Working Papers 18, Development and Policies Research Center (DEPOCEN), Vietnam.
  • Handle: RePEc:dpc:wpaper:1809
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    Cited by:

    1. Moelders, Florian, 2011. "Trade Persistence and the Limits of Trade Agreements," Proceedings of the German Development Economics Conference, Berlin 2011 58, Verein für Socialpolitik, Research Committee Development Economics.
    2. Thi Hanh Vu, 2013. "International Export Flows of Vietnam :A Gravity Model Approach," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 56(1), pages 83-108.
    3. Hanh Vu Thi, 2015. "Essays on the Export Performance of Vietnam/Essais sur la Performance à l'Exportation du Vietnam," ULB Institutional Repository 2013/216765, ULB -- Universite Libre de Bruxelles.
    4. Vu, Hanh Thi & Doan, Hung Quang, 2013. "Vietnamese rice exports: Do large destination markets stimulate?," MPRA Paper 63891, University Library of Munich, Germany, revised Sep 2013.
    5. Nguyen Thi Ha TRANG & Nguyen Thi Thanh TAM & Vu Hoang NAM, 2011. "An inquiry into the determinants of Vietnamese product export," Working Papers 08, Development and Policies Research Center (DEPOCEN), Vietnam.

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