Subhani, Muhammad Imtiaz and Osman, Ms. Amber and Khokhar, Rabia (2011): The new version of gravity model in explaining bilateral trade. “A comparative study for developed and developing nations”. Published in: EuroEconomica , Vol. 28, No. 2 (2011): pp. 41-50.
Download (190Kb) | Preview
World trade has grown rapidly. Several factors are highlighted by literature as the driving forces behind the growth of world trade. Reductions in barriers to trade are one of them. A comprehensive empirical investigation is carried to ascertain the trade reducing and increasing effect of barriers to trade and facilitators to trade. The new version of gravity model is developed in the connections in this study while analyzing the effect of GDP, distance, remittances, FDI, transportation cost, exchange rate, inflation, population, import and export of specifically trading partners on trade flows during bilateral trade. The study revealed that the developed version of gravity model explains the trade flows substantially and vigorously for the nations from developed world than for the nations from developing world.
|Item Type:||MPRA Paper|
|Original Title:||The new version of gravity model in explaining bilateral trade. “A comparative study for developed and developing nations”|
|English Title:||The new version of gravity model in explaining bilateral trade. “A comparative study for developed and developing nations”|
|Keywords:||Gravity model, Export, Import, Trade barriers, Trade facilitators|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
|Depositing User:||Muhammad Imtiaz Subhani|
|Date Deposited:||15. Nov 2011 10:44|
|Last Modified:||11. Feb 2013 12:19|
Baier, S. L., & Bergstrand, J. H. (2001). The Growth of World Trade: Tariffs, Transport Costs, and Income Similarity. Journal of International Economics 53(1), 1-27.
Baldwin, R., & Lewis, W. E. (1978). U.S. Tariff Effects on Trade and Employment in Detailed SIC Industries: The Impact of International Trade on Investment and Employment. Washington: U.S. Department of Labor.
Basevi, G. (1966). The United States Tariff Structure: Estimates of Effective Rates of Protection of United States Industries and Industrial Labour. The Review of Economics and Statistics, 48, 147-160.
Beghin, J.C., & Bureau, J.C. (2001). Quantitative Policy Analysis of Sanitary, Phytosanitary and Technical Barriers to Trade. Economies International, 88, 107-130.
Bhagwati, J. (1988). Protectionism. Cambridge, MA: The MIT Press.
Cline, W. R., Kawanabe, N., Kronsjo, T. O. M., & Williams, T. (1978). Trade Negotiations in the Tokyo Round: A Quantitative Assessment. Washington: Brookings Institute.
Corden, W.M. (1966). The Structure of a Tariff System and the Effective Protective Rate. Journal of Political Economy, 74, 221-37.
Corden, W.M. (1971). The Substitution Problem in the Theory of Effective Protection. Journal of International Economics, 1(1), 37-57.
Deardorff, A. V. (1984). Testing Trade Theories and Predicting Trade Flows. In: R. W. Jones and P. B. Kenen (ed.). Handbook of International Economics, 467-517.
Deardorff, A. V. (1998). Determinants Of Bilateral Trade: Does Gravity Work In A Neoclassical World?. In Frankel, J. A. (ed.). The Regionalization of the World Economy. University of Chicago for NBER: Chicago, 7-22.
Deardorff, A. V., & Stem, R. (1986). The Michigan Model of World Production and Trade: Theory and Applications. Cambridge, MA: The MIT Press.
Feenstra, R.C. (1992). How Costly is Protectionism. Journal of Economic Perspectives, 6, 159-178.
Feenstra, R.C. (1998). Integration of Trade and Disintegration of Production in the Global Economy. Journal of Economic Perspectives, 31-50.
Frankel, J., & Romer, D. (1996). Trade and Growth: An Empirical Investigation. National Bureau of Economic Research, 5476.
Gonzales, M. V., Bailes, J. C., & Amano, M. M. (1991). A Multidimensional Approach to Understanding Non-Tariff Trade Barriers. American Economic Review, 69-76.
Hansberg, E. R. (2005). A Spatial Theory of Trade. American Economic Review, 95(5), 1464-1491.
Harrigan, J. (1993). OECD Imports and Trade Barriers in 1983. Journal of International Economics, 35, 91-111.
Helpman, E. (1987). Imperfect Competition and International Trade: Opening Remarks. European Economic Review, 31(1-2), 77-81.
Hummels, D. (2007). Transportation Costs and International Trade in the Second Era of Globalization. Journal of Economic Perspectives, 21(3), 152-3.
Hummels, D., & Levinsohn, J. (1995). Monopolistic Competition and International Trade: Reconsidering The Evidence. Quarterly Journal of Economics, 110, 799-836.
Irwin, D.A. (1997). Changing the Course of U.S. Trade Policy in the 1930’s. National Bureau of Economic Research.
Kristjánsdóttir, H. (2005). What Drives Sector Allocation of Foreign Direct Investment in Iceland. Education Policy Research Unit, 05-08.
Krugman, P. R. (1995). America in the World Economy: Understanding the Misunderstandings. Japan and the World Economy, Elsevier, 7(2), 233-247.
Krugman, P. R. (2002). Was it All in Ohlin? A Centennial Celebration. MIT Press, Cambridge (MA), 1899-1999.
Lai, H., & Zhu, S. (2004). The Determinants of Bilateral Trade. Canadian Journal of Economics, 37 (2), 459-483.
Leamer, E. E. (1990). Latin American as a Target for Trade Barriers Erected by Major Developed Countries in 1983.
Journal of Development Economics, 32, 337-368. Poyhonen, P (1963). A Tentative Model for the Volume of Trade between Countries. Weltwertschaftliches Archive, 90, 93-100.
Rauch, J. E (1999). Networks versus Markets in International Trade. Journal of International Economics, 48, 7-35.
Ray, E. (1981). Tariff and Non-tariff Barriers to Trade in the United States and Abroad. Review of Economics and Statistics, 63, 161-168.
Romer, P. (1994). New Goods, Old Theory and the Welfare Cost of Trade Restrictions. Journal of Development Economics, 43, 5-38.
Sanso, M., Cuairan, R., & Sanz, F. (1993). Bilateral Trade Flows, the Gravity Equation, and Functional Form. Review of Economics and Statistics, 75, 266-275.
Tinbergen, J., (1962). Shaping the World Economy. Twentieth Century Fund, New York.
Trefler, D. (1993). Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of US Import Policy. Journal of Political Economy, 101(1), 138-60.
United Nations, (2008). Trade and Development Report 2008. UNCTAD, Geneva.
Waters, W.G. (1970). Transportation Costs, Tariffs, and the Pattern of Industrial Protection. American Economic Review, 60, 1013-20.
World Trade Report. (2007). Six Decades Of Multilateral Trade Cooperation: What Have We Learnt. World Trade Report 2007.