The Structural Gravity Model and Its Implications on Global Forest Product Trade

Christian Morland,Holger Weimar,Franziska Schier

doi:10.3390/f11020178

Abstract

The gravity model of trade is one of the most common approaches in modern econometrics. In its basic form, the model assumes that income and distance between two partners most likely play a major role in the occurrence of trade. Despite the long history of the gravity model and its high, universal explanatory potential, its application for the forest sector is not broad and refers only to the traditional definition of the gravity approach. However, this traditional approach is not able to explain all aspects of trade at a disaggregated sector level. Consequently, the present study aims to close this research gap and reveal influencing factors for the appearance and the intensity of forest product trade by applying the structural gravity approach. This is done via linear and non-linear estimation methods for the forest sector on the whole and for thirteen forest products in detail. Three major results were found: first, the traditional gravity approach overestimates the impact of the overall income on forest sector trade. Second, the appearance of wood market trade is not always influenced by the same factors as the quantity traded. Third, with increasing processing level, determinants of forest product trade seem to be influenced by different factors.

Highlights

In the complex network of international relationships, trade plays an important role for economic development, wealth and intercultural exchange
We will present the results of the structural gravity approach created in the present work
The traditional definition seems to hold even in the structural gravity environment. This result is independent from the underlying estimation method: fixed-effects approach (FE), Poisson pseudo maximum likelihood estimator (PPML) with zero trade flows, PPML

Summary

Introduction

In the complex network of international relationships, trade plays an important role for economic development, wealth and intercultural exchange. This is why the role of trade in the forestry and wood-based sector has already been analyzed in many ways, e.g., in context of the forest transition [1], illegal logging [2] or the network theory [3]. The gravity model is characterized by both a long history of applications across disciplines and by high empirical relevance [8] While it gained attention in general economics, only few studies used the gravity model to describe bilateral trade in forestry and forest-based sectors.

Objectives

Methods

Results

Conclusion