Estimating inter-regional trade: the radiation model versus the gravity model

Abstract

The estimation of interregional trade flows within a country is confined to the context of multi-regional input–output models. Despite the remarkable relevance of these trade flows for regional incomes, most countries have almost no official data, with Korea being an exception used here. In addition to survey-based estimation methods, there are non-survey methods, some based on gravity models, which can be used to estimate inter-regional trade flows. This paper compares the gravity model with the novel radiation model. Preliminary results show that the accuracy of the radiation model’s estimation is superior to that of the gravity model, with the invaluable benefit of not needing to estimate regression coefficients, unlike the gravity model. This finding provides a generalisation of the radiation model for estimating interregional trade in contexts where there is no prior multi-regional input–output table without restrictions derived from coefficient estimation as in the gravity model.