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

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  • Paas, Tiiu

Abstract

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
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    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. Kaukin, Andrei & Idrisov, Georgij, 2013. "The gravity model of foreign trade in Russia: the case of a large area of the country with the longest border," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 133-145, August.
    4. 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 Kiel).
    5. Lammers, Konrad, 2002. "Die Osterweiterung aus raumwirtschaftlicher Perspektive - Prognosen regionalokonomischer Theorien und Erfahrungen aus der bisherigen Integration in Europa," Discussion Paper Series 26126, Hamburg Institute of International Economics.
    6. Enrique Martínez-Galán & Maria-Paula Fontoura & Isabel Proença, 2005. "Trade Potential In An Enlarged European Union: A Recent Approach," International Trade 0508011, University Library of Munich, Germany.
    7. 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).
    8. Mr. Theodora Kosma & Antonis Adam & Mr. James McHugh, 2003. "Trade Liberalization Strategies: What Could South Eastern Europe Learn From Cefta and Bfta?," IMF Working Papers 2003/239, International Monetary Fund.

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    More about this item

    Keywords

    International trade; gravity models; Baltic Sea region;
    All these keywords.

    JEL classification:

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

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