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The Evolution of Structural Gravity: The Workhorse Model of Trade

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  • Yoto Yotov

    (Drexel University)

Abstract

The gravity model of trade is a ‘celebrity’, due to its intuitive appeal, solid theoretical foundations, and remarkable empirical success. Yet, many economists still view gravity simply as a naive reduced-form estimating equation and apply it without guidance from theory, while others are skeptical about its usefulness for counterfactual projections. The objective of this paper is to offer a historical overview of the evolution of the gravity model, from an a-theoretical application to an estimating computable general equilibrium (E-CGE) model, which can be nested in more complex frameworks. Along the way, I address some misconceptions about the gravity model, summarize the current recommendations for gravity estimations, highlight some properties that have made gravity so successful, and review the latest contributions to the related literature.

Suggested Citation

  • Yoto Yotov, 2024. "The Evolution of Structural Gravity: The Workhorse Model of Trade," School of Economics Working Paper Series 2024-10, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2024_010
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    Cited by:

    1. Yoto Yotov, 2025. "Gravity for Undergrads," Working Papers 202519, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    2. Clara Brandi & Federico Carri-Caccia, 2025. "Preventing pollution havens? Environmental Provisions in Preferential Trade Agreements and Foreign Direct Investment," Working Papers 202513, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    3. Stefani Stefanova & Sophie Bandarkar & Yoto Yotov, 2025. "A Reassessment of the Impact of the Organization for Economic Co-operation and Development on International Trade," Working Papers 202509, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    4. Sabeer, Vadakke Cholakkakath, 2025. "International migration and trade: A comparative analysis of China and India," Journal of Asian Economics, Elsevier, vol. 100(C).
    5. Rebecca Freeman & Mario Larch & Angelos Theodorakopoulos & Yoto V. Yotov, 2025. "Unlocking New Methods to Estimate Country‐Specific Effects and Trade Elasticities With the Structural Gravity Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(6), pages 669-684, September.

    More about this item

    Keywords

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    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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