GRAVITY MODELING: INTERNATIONAL TRADE AND R&D

Josheski, Dushko and Fotov, Risto (2013): GRAVITY MODELING: INTERNATIONAL TRADE AND R&D. Forthcoming in:

Abstract

In this paper issue of gravity modeling in international trade has been investigated. Standard gravity equation augmented with other variables to control for transportation cost, whether trade partners are neighbors and whether country is landlocked, or countries participants in trade have had colonial history together. Also in our model we control whether traded commodities are homogenous, differentiated or high tech, as well referenced. Variable to denote technology are: TAI index, which stands for technological achievement index, also variables for creation and diffusion of technology, as measured by the number of patents from the residents and royalty and license fees receipts, by the foreign citizens. Results are as expected and the show that trade is highly dependent on the exporters and importers levels of technology.

• Item Type: MPRA Paper
• Language: English
• Keywords: Key words: bilateral trade, gravity model, R&D, OLS, PPML
• Subjects: F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade

References

1. Abrams (1980) International trade Flows under Flexible Exchange rates, Economic Review of the Federal Reserve Bank of Kansas City, 65(3), 3-10.

2. Alesina, A.,Spolaore,E.,Wacziarg,R.,(1997),Economic integration and politic disintegration, NBER working paper

3. Anderson, J.A Theoretical Foundation for the Gravity Equation, American Economic Review (63) (March 1979), 106-16.

4. Bergstrand, J. (1985) The Gravity Equation in International Trade, Review of Economics and Statistics, 67(3), 474-81.

5. Bikker, J. (1987) An International Trade Flow Model with Substitution: An Extension of the Gravity Model, Kykos, 40, 315-37.

6. Coe and Helpman (1995), "International R&D Spillovers" European Economic Review, 39 (5): 859-887

7. Laura Márquez-Ramos; Inmaculada Martínez-Zarzoso, 2010, "The Effect of Technological Innovation on International Trade. A Nonlinear Approach [Dataset]", http://hdl.handle.net/1902.1/14520 Economics: The Open-Access, Open-Assessment E-Journal [Distributor] V1 [Version]

8. Leamer, E. and Stern R. (1970) Quantitative International Economics (Boston: Allyn and Bacon).

9. Linneman, H. (1966) An Econometric Model of International trade flows (Amsterdam: North Holland Publishing Co.).

10. Oguledo, V. and MacPhee, C. (1994) Gravity models: a reformulation and an application to discriminatory trade arrangements, Applied Economics, 26, 107-120.

11. Pöyhönen, P. (1963) A Tentative Model for the Volume of Trade between Countries, Weltwirtschaftliches Archiv, 90(1), 93-100.

12. Rivera-Batiz and P. Romer (1991), "International Trade with Endogenous Technical Change." European Economic Review, 35: 971-1004.

13. Thursby J. and Thursby, M. (1987) Bilateral Trade Flows, The Linder Hypothesis, and Exchange Risk, Review of Economics and Statistics, LXIX(3), 488-95.