IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Prospects for Trade in Intermediates and Trade in Services: What Does the Gravity Model of Bilateral Trade Tell Us?

  • Haruka Yane

    (Graduate student, Osaka School of International Public Policy, Osaka University)

Registered author(s):

    This study uses product-level international bilateral trade panel data for the period 1995 to 2009, covering 40 countries from the recently released World Input-Output Database (WIOD). Constructing this dataset into a standard gravity model, this paper aims to compare the magnitude of coefficients across two pairs of equations with different dependent variables: trade in intermediates in comparison with trade in final products, and total trade in goods as opposed to total trade in services. So as to investigate these differences further, this study also analyzes the models by sector. This paper applies the sample selection model in order to account for the zero trade flows. Estimation results confirm that trading partners in East Asia engage much more in both trade in intermediate inputs and assembled final products, especially the former, compared to EU and NAFTA blocs. Trade in services presents remarkable resilience to the current financial crisis. Intermediate services trade, in particular, is affected less by trade costs and market size. By liberalizing trade and increasing economic freedom, there will be a highly significant, positive effect on nearly all kinds of trade flows.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 13E002.

    in new window

    Length: 31 pages
    Date of creation: Feb 2013
    Date of revision:
    Handle: RePEc:osp:wpaper:13e002
    Contact details of provider: Postal:
    1-31, Machikaneyama, Toyonaka, Osaka, 560-0043

    Phone: +81-6-6850-6111
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
    2. Borchert, Ingo & Mattoo, Aaditya, 2009. "The crisis-resilience of services trade," Policy Research Working Paper Series 4917, The World Bank.
    3. Burger, M.J. & van Oort, F.G. & Linders, G.J.M., 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-Inflated Estimation," ERIM Report Series Research in Management ERS-2009-003-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    4. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andre Shleifer, 2000. "The Regulation of Entry," Harvard Institute of Economic Research Working Papers 1904, Harvard - Institute of Economic Research.
    5. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
    6. Sébastien Miroudot & Rainer Lanz & Alexandros Ragoussis, 2009. "Trade in Intermediate Goods and Services," OECD Trade Policy Papers 93, OECD Publishing.
    7. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2009. "Who produces for whom in the world economy?," Working Papers hal-01066205, HAL.
    8. Takatoshi Ito & Anne O. Krueger, 2003. "Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11," NBER Books, National Bureau of Economic Research, Inc, number ito_03-1, June.
    9. Robert C. Johnson & Guillermo Noguera, 2012. "Fragmentation and Trade in Value Added over Four Decades," NBER Working Papers 18186, National Bureau of Economic Research, Inc.
    10. Fukao, Kyoji & Ito, Keiko, 2000. "Foreign Direct Investment and Service Trade: The Case of Japan," Discussion Paper Series a394, Institute of Economic Research, Hitotsubashi University.
    11. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    12. Fukunari Kimura & Hyun-Hoon Lee, 2006. "The Gravity Equation in International Trade in Services," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(1), pages 92-121, April.
    13. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    14. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February.
    15. Sébastien Miroudot & Alexandros Ragoussis, 2009. "Vertical Trade, Trade Costs and FDI," OECD Trade Policy Papers 89, OECD Publishing.
    16. Takatoshi Ito & Anne O. Krueger, 2003. "Introduction to "Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11"," NBER Chapters, in: Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11, pages 1-10 National Bureau of Economic Research, Inc.
    17. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:osp:wpaper:13e002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Akiko Murashita)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.