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The Three Puzzles in the Gravity Model of International Trade

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  • Akira Sasahara

    (Keio University)

Abstract

This article provides an overview of three puzzles related to the gravity model of trade---the Glick–Rose puzzle, the border puzzle, and the missing globalization puzzle. It summarizes recent developments in estimation methods, including the shift from cross-sectional to panel settings, the inclusion of appropriate fixed effects, and the shift from log-linear specifications to nonlinear approaches.

Suggested Citation

  • Akira Sasahara, 2026. "The Three Puzzles in the Gravity Model of International Trade," Keio-IES Discussion Paper Series DP2026-002, Institute for Economics Studies, Keio University.
    • Handle: RePEc:keo:dpaper:dp2026-002
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    File URL: https://ies.keio.ac.jp/upload/DP2026-002_EN.pdf
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    References listed on IDEAS

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    1. Maria Cipollina & Luca Salvatici, 2010. "Reciprocal Trade Agreements in Gravity Models: A Meta‐Analysis," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 63-80, February.
    2. Glick, Reuven & Rose, Andrew K., 2016. "Currency unions and trade: A post-EMU reassessment," European Economic Review, Elsevier, vol. 87(C), pages 78-91.
    3. Andrew K. Rose, 2017. "Why do Estimates of the EMU Effect on Trade Vary so Much?," Open Economies Review, Springer, vol. 28(1), pages 1-18, February.
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    5. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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    9. David T Coe & Arvind Subramanian & Natalia T Tamirisa, 2007. "The Missing Globalization Puzzle: Evidence of the Declining Importance of Distance," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 34-58, May.
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    12. Maddalena Conte & Pierre Cotterlaz & Thierry Mayer, 2022. "The CEPII Gravity Database," Working Papers 2022-05, CEPII research center.
    13. Richard Baldwin, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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