IDEAS home Printed from
   My bibliography  Save this paper

Gravity approach for exploring Baltic Sea regional integration in the field of international trade


  • Paas, Tiiu


The paper is inviting a reader to think to what extent we can use the knowledge resulting from laws of nature for exploring economic processes. In order to look for the answers on this question, the paper is going to explore international trade flows between the Baltic Sea region countries using a gravity approach. Attention is paid to analyzing forces that attract foreign trade flows and to exploring the influence of distance as an indicator that expresses both transportation costs and cultural proximity of the countries. The results of modeling support the statement that the size of economy has statistically significant and positive influence on the bilateral trade relations of the region. The influence of economic development level that is expressed by GDP per capita is statistically insignificant. In the case of the Baltic regional integration, distance is expressing most significantly cultural proximity and historical relationship between the countries. The regional integration effect in trade is inherently larger for small countries. Small economies in transition have to look for a regional niche to penetrate into the international market.

Suggested Citation

  • Paas, Tiiu, 2002. "Gravity approach for exploring Baltic Sea regional integration in the field of international trade," HWWA Discussion Papers 180, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26379

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. James Harrigan, 2001. "Specialization and the volume of trade: do the data obey the laws?," Staff Reports 140, Federal Reserve Bank of New York.
    2. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    3. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    4. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    5. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    6. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December.
    7. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    8. Wang, Zhen Kun & Winters, L. Alan, 1991. "The Trading Potential of Eastern Europe," CEPR Discussion Papers 610, C.E.P.R. Discussion Papers.
    9. Baldwin, Richard, 1993. "The Potential for Trade Between the Countries of EFTA and Central and Eastern Europe," CEPR Discussion Papers 853, C.E.P.R. Discussion Papers.
    10. Cees van Beers & Guido Biessen, 1996. "Trade Possibilities and Structure of Foreign Trade: The Case of Hungary and Poland," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 38(2-3), pages 1-19, September.
    11. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    12. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-1229, December.
    13. Tiiu Paas, 2000. "The gravity approach for modeling international trade patterns for economies in transition," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(4), pages 633-648, November.
    14. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    15. M. V. Posner, 1961. "International Trade And Technical Change," Oxford Economic Papers, Oxford University Press, vol. 13(3), pages 323-341.
    16. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    17. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
    18. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    19. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Getachew, Asgedom Tessema & Tadele, Ferede & Arega, Hailu & Fantu, Guta, 2001. "The Impact of Regional Economic Cooperation on the Ethiopian Manufacturing Sector: the Case of Common Market for Southern and Eastern Free Trade Area (COMESA-FTA)," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 10(1).
    2. Isabel Proença & Maria Fontoura & Enrique Martínez-Galán, 2008. "Trade in the enlarged European Union: a new approach on trade potential," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 7(3), pages 205-224, December.
    3. Laaser, Claus-Friedrich & Schrader, Klaus, 2003. "Neue Partner in Europa: der baltische Außenhandel im Umbruch," Open Access Publications from Kiel Institute for the World Economy 3128, Kiel Institute for the World Economy (IfW).
    4. Antonis Adam & James McHugh & Theodora Kosma, 2003. "Trade Liberalization Strategies; What Could South Eastern Europe Learn From Cefta and Bfta?," IMF Working Papers 03/239, International Monetary Fund.
    5. Enrique Martínez-Galán & Maria-Paula Fontoura & Isabel Proença, 2005. "Trade Potential In An Enlarged European Union: A Recent Approach," International Trade 0508011, EconWPA.
    6. Lammers, Konrad, 2002. "Die Osterweiterung aus raumwirtschaftlicher Perspektive : Prognosen regionalökonomischer Erfahrungen aus der bisherigen Integration in Europa," HWWA Discussion Papers 195, Hamburg Institute of International Economics (HWWA).

    More about this item


    International trade; gravity models; Baltic Sea region;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F10 - International Economics - - Trade - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:hwwadp:26379. 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: (ZBW - German National Library of Economics). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.