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Measuring Trade and Trade Potential : A Survey

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  • Shiro Armstrong

    (ANU)

Abstract

This paper provides a survey and a brief critical review of the literature on the widely used gravity models of trade, as a prelude to the justification of its use with the stochastic frontier methodology. The important papers on the theoretical foundations of the gravity model are reviewed and related to papers applied to explain determinants of trade flows. Then some shortcomings of the gravity model are discussed. The paper introduces the stochastic frontier gravity model as a way of estimating trade resistances and overcoming some of the shortcomings of conventional gravity models in their use for that purpose.

Suggested Citation

  • Shiro Armstrong, 2007. "Measuring Trade and Trade Potential : A Survey," Trade Working Papers 21904, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:tradew:21904
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    File URL: http://www.eaber.org/node/21904
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    References listed on IDEAS

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    1. Peter Drysdale & Xinpeng Xu, 2007. "Taiwan's Role in the Economic Architecture of East Asia and the Pacific," World Scientific Book Chapters,in: Economic Reform And Cross-Strait Relations Taiwan and China in the WTO, chapter 5, pages 149-185 World Scientific Publishing Co. Pte. Ltd..
    2. Baldwin, Richard & Taglioni, Daria, 2006. "Gravity for Dummies and Dummies for Gravity Equations," CEPR Discussion Papers 5850, C.E.P.R. Discussion Papers.
    3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, pages 691-751.
    4. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, pages 682-698.
    5. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, pages 98-114.
    6. James Harrigan, 2001. "Specialization and the Volume of Trade: Do the Data Obey the Laws?," NBER Working Papers 8675, National Bureau of Economic Research, Inc.
    7. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, pages 474-481.
    8. Drysdale, Peter & Garnaut, Ross, 1982. "Trade Intensities and the Analysis of Bilateral Trade Flows in a Many-Country World : A Survey," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 22(2), pages 62-84, February.
    9. Nilsson, Lars, 2000. "Trade integration and the EU economic membership criteria," European Journal of Political Economy, Elsevier, vol. 16(4), pages 807-827, November.
    10. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
    11. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, pages 615-623.
    12. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, pages 62-81.
    13. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, pages 21-37.
    14. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
    15. K. Kalirajan, 1999. "Stochastic varying coefficients gravity model: An application in trade analysis," Journal of Applied Statistics, Taylor & Francis Journals, pages 185-193.
    16. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    17. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Augmented gravity model: An empirical application to Mercosur- European trade flows," International Trade 0309019, EconWPA.
    18. Peter Egger, "undated". "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO.
    19. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
    20. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, pages 106-116.
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    Citations

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    Cited by:

    1. Johan Fourie & María Santana-Gallego, 2013. "The determinants of African tourism," Development Southern Africa, Taylor & Francis Journals, pages 347-366.
    2. repec:bpj:glecon:v:17:y:2017:i:1:p:19:n:7 is not listed on IDEAS
    3. Groizard, José Luis & Marques, Helena & Santana, María, 2014. "Islands in trade: Disentangling distance from border effects," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-46.
    4. Shiro Armstrong, 2009. "Japanese FDI in China: determinants and performance," Asia Pacific Economic Papers 378, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    5. Johan Fourie & María Santana-Gallego, 2013. "The determinants of African tourism," Development Southern Africa, Taylor & Francis Journals, pages 347-366.
    6. Md Rajibul Ahsan & Son Ngoc Chu, 2014. "The Potential and Constraints of the Exports of Environmental Goods (EGs): the case of Bangladesh," ASARC Working Papers 2014-05, The Australian National University, Australia South Asia Research Centre.
    7. repec:eee:touman:v:32:y:2011:i:6:p:1364-1370 is not listed on IDEAS
    8. Shiro Armstrong & Peter Drysdale & Kaliappa Kalirajan, 2008. "Asian Trade Structures and Trade Potential : An Initial Analysis of South and East Asian Trade," EABER Working Papers 21753, East Asian Bureau of Economic Research.
    9. Nobuaki Yamashita, 2010. "International Fragmentation of Production," Books, Edward Elgar Publishing, number 13615, September.
    10. Miran, Bülent & Atiş, Ela & Bektaȿ, Zerrin & Salalı, Ece & Cankurt, Murat, 2013. "An Analysis of International Raisin Trade: A Gravity Model Approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152200, Australian Agricultural and Resource Economics Society.
    11. Zwinkels, Remco C.J. & Beugelsdijk, Sjoerd, 2010. "Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?," International Business Review, Elsevier, pages 102-115.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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