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The Variation of Gravity within Countries

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  • Yotov, Yoto

    (Drexel University)

Abstract

The gravity equation is the workhorse model for analysis of bilateral trade flows. Despite solid theoretical foundations and clear gains from theory-consistent policy analysis, there are still gaps between gravity theory and empirics. This paper focuses on domestic trade flows, and I argue that there are significant benefits from adhering to theory by estimating gravity equations with domestic (in addition to international) trade flows. To this end, I review the contributions from the related literature and I synthesize them into fifteen arguments for using domestic trade flows in gravity estimations. The survey of the literature reveals the need for further theory contributions and new data developments, and points to opportunities for more empirical analysis and policy applications.

Suggested Citation

  • Yotov, Yoto, 2021. "The Variation of Gravity within Countries," School of Economics Working Paper Series 2021-12, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2021_012
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    Citations

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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. Felbermayr, Gabriel & Yotov, Yoto V., 2021. "From theory to policy with gravitas: A solution to the mystery of the excess trade balances," European Economic Review, Elsevier, vol. 139(C).
    3. Hillrichs, Dorothee & Vannoorenberghe, Gonzague, 2022. "Trade costs, home bias and the unequal gains from trade," Journal of International Economics, Elsevier, vol. 139(C).
    4. Kazunobu Hayakawa & Hiroshi Mukunoki, 2023. "The magnification effect in global value chains," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 141-157, February.
    5. Camille Reverdy, 2023. "Estimating the general equilibrium effects of services trade liberalization," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 493-521, May.
    6. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    7. Korn, Tobias & Stemmler, Henry, 2022. "Your Pain, My Gain? Estimating the Trade Relocation Effects from Civil Conflict," Hannover Economic Papers (HEP) dp-698, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    8. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    9. Federico Carril-Caccia & Juliette Milgram Baleix & Jordi Paniagua, 2022. "Does terrorism affect greenfield investment? A structural gravity approach," ThE Papers 22/06, Department of Economic Theory and Economic History of the University of Granada..
    10. Sébastien Miroudot & Davide Rigo, 2022. "Multinational production and investment provisions in preferential trade agreements [Intra-industry foreign direct investment]," Journal of Economic Geography, Oxford University Press, vol. 22(6), pages 1275-1308.
    11. Lionel Fontagné & Mathilde Lebrand & Siobhan Murray & Michele Ruta & Gianluca Santoni, 2023. "Trade and Infrastructure Integration in Africa," Working Papers 2023-14, CEPII research center.
    12. Korn, Tobias & Stemmler, Henry, 2022. "Your Pain, My Gain? On the Trade Relocation Effects from Civil Conflict," VfS Annual Conference 2022 (Basel): Big Data in Economics 264095, Verein für Socialpolitik / German Economic Association.
    13. Camille Reverdy, 2023. "Estimating the general equilibrium effects of services trade liberalization," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 493-521, May.
    14. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    15. Kwon, Ohyun & Syropoulos, Constantinos & Yotov, Yoto, 2022. "The Extraterritorial Effects of Sanctions," School of Economics Working Paper Series 2022-3, LeBow College of Business, Drexel University.
    16. Cuñat, Alejandro & Zymek, Robert, 2022. "The (structural) gravity of epidemics," European Economic Review, Elsevier, vol. 144(C).
    17. Esteve-Pérez Silviano & Gil-Pareja Salvador & Paniagua Jordi & Llorca-Vivero Rafael, 2021. "Corruption and International Trade: A Re-assessment with Intra-National Flows," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 187-198, January.
    18. Fraser, Benjamin, 2021. "Services Trade Modelling: DIT Analysis Working Paper," MPRA Paper 110321, University Library of Munich, Germany.
    19. Pedro Esteban Moncarz & Manuel Flores & Sebastian Villano & Marcel Vaillant, 2021. "Evolución de la integración económica de América Latina: una perspectiva comparada de las dos últimas décadas," Asociación Argentina de Economía Política: Working Papers 4493, Asociación Argentina de Economía Política.
    20. Peter H. Egger & Mario Larch & Yoto V. Yotov, 2022. "Gravity Estimations with Interval Data: Revisiting the Impact of Free Trade Agreements," Economica, London School of Economics and Political Science, vol. 89(353), pages 44-61, January.
    21. Hayakawa, Kazunobu & Jongwanich, Juthathip & Kohpaiboon, Archanun, 2022. "The trade effect of non-tariff measures in a high-quality trade agreement," IDE Discussion Papers 871, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

    Domestic Trade Flows; Structural Gravity; Trade Policy; Estimation;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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