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Disaggregated Gravity: Benchmark Estimates and Stylized Facts from a New Database

Author

Listed:
  • Borchert, Ingo

    (University of Sussex Business School)

  • Larch, Mario

    (University of Bayreuth)

  • Shikher, Serge

    (United States International Trade Commission)

  • Yotov, Yoto

    (Drexel School of Economics)

Abstract

The objective of this paper is threefold. First, we test and validate the new International Trade and Production Database for Estimation (ITPD-E) for disaggregated gravity estimations. Second, we capitalize on the rich industry dimension of the ITPD-E to obtain benchmark gravity estimates for a wide range (170) of industries. We document differences and similarities of the impact of the standard gravity variables across the broad sectors of Agriculture, Mining and Energy, Manufacturing, and Services. Third, we use the large number of disaggregated gravity estimates to evaluate the stylized facts and best practice recommendations for gravity estimations. We compare the results obtained using Poisson Pseudo Maximum Likelihood (PPML) estimation with the results from several alternative specifications, including OLS, PPML without the zero trade flows, PPML with interval data, PPML without domestic trade, and PPML without the proper set of fixed effects to control for the multilateral resistances in gravity regressions that pool across industries. The findings from these experiments confirm and reinforce some results from the literature while challenging others.

Suggested Citation

  • Borchert, Ingo & Larch, Mario & Shikher, Serge & Yotov, Yoto, 2020. "Disaggregated Gravity: Benchmark Estimates and Stylized Facts from a New Database," School of Economics Working Paper Series 2020-8, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2020_008
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    References listed on IDEAS

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    Cited by:

    1. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    2. Larch,Mario,Tan,Shawn Weiming,Yotov,Yoto Valentinov, 2021. "A Simple Method to Quantify the ex-ante Effects of “Deep” Trade Liberalization and “Hard” Trade Protection," Policy Research Working Paper Series 9791, The World Bank.
    3. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
    4. Marta Bengoa & Blanca Sanchez-Robles & Yochanan Shachmurove, 2020. "Do Trade and Investment Agreements Promote Foreign Direct Investment within Latin America? Evidence from a Structural Gravity Model," Mathematics, MDPI, vol. 8(11), pages 1-32, October.
    5. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    6. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    7. Borchert, Ingo & Larch, Mario & Shikher, Serge & Yotov, Yoto V., 2021. "The International Trade and Production Database for Estimation (ITPD-E)," International Economics, Elsevier, vol. 166(C), pages 140-166.

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    More about this item

    Keywords

    domestic trade; internal trade; domestic national trade; gravity estimation;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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