Philippine Export Efficiency and Potential: An Application of Stochastic Frontier Gravity Model
This study was conducted to investigate the issue of what Philippine merchandise trade flows would be if countries operated at the frontier using gravity model. The study sought to estimate the coefficients of the gravity equation. The estimated coefficients were used to estimate merchandise export potentials and technical efficiency of each country in the sample and these were also aggregated to measure impact of country groups. Result of the estimated coefficients of the gravity equation shows that merchandise export flows of the Philippines to trading partners is significantly positively affected by income and market size of the importing partner. The income elasticity of merchandise exports is 0.69%. A 1% increase in market size increases export flow by 0.24%. Distance was estimated to reduce export flow by 1.22% in every 1% increase in distance. The technical efficiency for all sample countries is not so high; it ranged from 38 to 42% with standard deviation of 30. The most efficient countries in the sample which recorded more than 80% efficiency were Singapore (100%), New Zealand (97%), HongKong (97%), USA (96%), Australia (96%), Canada (96%), UK (93%), Denmark (93%), Japan (87%), Malaysia (85%) and S. Korea (81%). Countries with larger markets emerge as high export potentials such as USA, China and Japan with potential ranging from 10 to 30 Trillion US dollars. These potential has been changing within the period. Result of technical inefficiency model reveals that these potential is increased by membership of the Philippines to ASEAN, APEC and WTO. Reduction of corruption and freer labor market in the importing country enhances export potential of Philippine merchandise exports. Commonality of language also enhances these potential.
|Date of creation:||Feb 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- 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, 02.
- Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Peter Egger, .
"A Note on the Proper Econometric Specification of the Gravity Equation,"
WIFO Working Papers
- Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
- Kabir, Mahfuz & Salim, Ruhul, 2010. "Can Gravity Model Explain BIMSTEC’s Trade?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 144-166.
- 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.
- Heejoon Kang & Michele Fratianni, 2006. "International Trade Efficiency, the Gravity Equation, and the Stochastic Frontier," Working Papers 2006-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Ekanayake, E. M. & Mukherjee, Amit, 2010. "Trade Blocks and the Gravity Model: A Study of Economic Integration among Asian Developing Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 627-643.
- 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.
- Tomasz Brodzicki, 2009. "Extended Gravity Panel Data Model of Polish Foreign Trade," Working Papers 0901, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.
- Kalirajan, K P & Shand, R T, 1999. " Frontier Production Functions and Technical Efficiency Measures," Journal of Economic Surveys, Wiley Blackwell, vol. 13(2), pages 149-72, April.
- Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
- Yongcheol Shin & Laura Serlenga, 2007. "Gravity models of intra-EU trade: application of the CCEP-HT estimation in heterogeneous panels with unobserved common time-specific factors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 361-381.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:53580. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.