Panel Data Gravity Model Research Articles

Regular domestic air passenger market dynamics: The Brazilian case

Brazil occupies a prominent position as one of the largest domestic air passenger markets globally. In May 2019, OAG Aviation Worldwide Limited (OAG), a renowned global travel data provider, ranked Brazil as the world’s 6th largest domestic market. This study identifies and meticulously analyses statistical trends in how service levels affect passenger demand on domestic air routes in Brazil. To that end, it employs a panel-data gravity model incorporating service as an instrumental variable. The findings confirm the influence of traditional gravity explanatory variables, while also contributing novel insights into the impact of service levels on domestic routes. The analysis reveals that, while factors such as income and distance play a fundamental role in shaping domestic demand, level of service emerges as a crucial determinant on regional connections. Overall, the statistics suggest growing divergences between Brazilian airlines and regional air transport. Accordingly, substantial changes are necessary in both government policies and the services offered by the airline industry in order to harness the full potential of Brazil’s domestic air transport passenger market and foster regional development.

The effect of non-tariff measures (NTMS) on Indonesian pulp and paper exports

<span lang="EN-US">Non-Tariff Measures (NTMs) are likely applied by some major trading countries. The NTM policy mostly applies Sanitary and Phytosanitary (SPS) and Technical Barrier to Trade (TBT). Pulp and Paper commodities are some of Indonesia’s potential exports facing NTM barriers by a number of major destinations countries. This study is aimed to evaluate the effects of NTMs upon Indonesian pulp and paper export in the main destinations. NTMs are represented by coverage ratio of SPS and coverage ratio of TBT. The effect of NTMs imposition to pulp and paper between Indonesia and its main trade partners is estimated by using a panel data gravity model that is constructed by disaggregated data on bilateral export trade flow of pulp and paper between Indonesia and its main trade partners for the period from 2005 to 2019. The gravity model is estimated by a fixed effects model, Poisson Pseudo Maximum Likelihood, and Hausman Taylor model. The results indicated that the imposition of SPS and TBT of destination countries presented a positive and significant impact upon the Indonesian export of pulp. However, the imposition of SPS and TBT of destination countries presented a negative and significant impact upon the Indonesian export of paper.</span>

The role of cultural distance in boosting international tourism arrivals in ASEAN: a gravity model

PurposeThis study aims to explore the role of cultural distance, economic integration, price competitiveness and substitution prices for tourism arrivals between 10 Southeast Asian (ASEAN) countries and 22 other origin countries from 2007 to 2019.Design/methodology/approachA panel-data gravity model is applied to estimate tourism demand in the ASEAN region. An index of cultural distance (time-variant) is introduced to examine the role of cultural differences across bilateral partners. Moreover, relative prices and substitution prices are introduced to the gravity equation to estimate price elasticities. Finally, this study tested whether the ASEAN free trade agreements (FTAs) encourage intraregional tourism arrivals. Two-panel regression approaches are used to test the model.FindingsCultural distance positively affects tourism inflows, boosting foreign arrivals. Income and price elasticities are important determinants in the demand model for ASEAN. A gain in price competitiveness versus alternative destinations can lead to substitution in destination choice. Meanwhile, geographic distance has a negative impact on arrivals, suggesting that connectivity and transportation are key in boosting tourism inflows in ASEAN. A decline in the disposable incomes of tourists caused by the COVID-19 pandemic may reduce tourism arrivals in the region. However, when currencies in ASEAN weaken, and consumer prices are lower than in other destinations, arrivals in ASEAN will be stimulated. FTAs have facilitated travel intra-ASEAN, which is an advantage over the extra-ASEAN sector.Practical implicationsCultural heritage could be used in tourism promotion as ASEAN can attract tourists seeking novelty and new excitements. ASEAN countries could create complementary destinations and jointly promote cultural heritage to accelerate the region’s recovery. The depreciation of currencies in ASEAN and the gain in relative price competitiveness could attract more tourist visits, helping the region reestablish tourism activities in a postpandemic economy.Originality/valueThe model accounts for three key variables in the gravity approach: cultural distance in ASEAN tourism inflows, the effects of the ASEAN economic community on intraregional tourism, and relative and alternative price competitiveness. This study enriches the literature about tourism-demand approaches in modeling tourism arrivals.

Quality of Indonesia’s domestic institutions and export performance in the era of global value chains

The focus of this research is on analysing the effects of institutional quality and trade agreements on Indonesia bilateral trade in four commodity groups in the era of global value chain (GVC). Employing a panel data gravity model of Indonesian export of four commodities to Indonesia’s trading partners from 2000 to 2018 and estimating the Feasible Generalized Least Squares (FGLS) and the Poisson Pseudo Maximum Likelihood Method (PPML), the results of this study find that institutional quality plays a different role in explaining Indonesia’s export performance of those four commodities, despite the fact that institutions contribute positively. On two commodities that are prospective to increase Indonesia participation in the global value chain, exported intermediates and consumer goods, we find that although both domestic institutions and trading partner institutions are significant to Indonesian export, but we argue that domestic institutions contribute more. This study also reveals that through tariff reductions, Indonesian trade agreements are significant regarding export of all the four commodities group. However, even though tariffs are significant, we find that the quality of institutions, especially domestic institutions, has a greater effect on Indonesia's exports.

Exploring The Factor Relationship of International Trade: A Panel Data Gravity Model Approach

Exploring The Factor Relationship of International Trade: A Panel Data Gravity Model Approach

Bayesian estimation of dynamic panel data gravity model

In this paper, we develop Bayesian estimation method for inference of dynamic panel data gravity model. Our method deals with the many zeros problem and at the same time, allows for lagged dependent variables and multiple sets of unobserved effects. We apply our Bayesian estimation algorithm to reexamine the contemporaneous effect of GATT/WTO membership on trade. We find that our dynamic gravity model fits the data better than the same model without the lagged dependent variables that is often used in the literature and trade flow in the previous period has a large and positive effect on trade flow in the current period. We also find that the GATT/WTO membership does not appear to have a contemporaneous effect on trade flow. This result is consistent with the findings ofsome studies in the literature, but not with those of others. These results show the importance of including lagged dependent variables and multiple sets of unobserved effects in gravity model estimation.

Who Benefits from More Housing? A Panel Data Study on the Role of Housing in the Intermunicipal Migration of Different Age Cohorts in Sweden

Although Swedish housing standards are high and young adults leave the parental home relatively early, there are indications that for certain groups housing has, in recent years, become less accessible. We analyse how housing characteristics affect intermunicipal mobility for different age cohorts and estimate a panel data gravity model that models migration as a function of origin and destination characteristics. The results suggest that new construction in the past two decades has negatively affected migration within commuting regions more than migration between commuting regions. For metropolitan areas, there are considerable negative effects on net migration from other commuter regions because new construction has not kept pace with population growth. The effects are stronger for young adults (20-44) compared to older adults (45-74). Further, we find that, while new construction stimulates mobility for all age cohorts, the estimated relationship is weaker for the youngest adults; indicating a need for more variation in new construction to satisfy different needs. Also, we find that the decreased share of rentals since 1992 have negatively affected the short-distance mobility of the youngest adults while the effect is weaker or even positive for the remaining age cohorts.

Product Complexity in International Production Networks: Comparing EU Core and Old and New EU Periphery

ABSTRACTThis paper focuses on analyzing the complexity level of the basket of parts and components exported by EU countries and how it is related to trade linked to international production networks. Three blocks of EU countries, which enjoy different available comparative advantages, are distinguished (Core, New Periphery, and Old Periphery). Our analysis shows that more than one third of exports of P&Cs are of very high complexity in the three blocks of countries. By estimating a panel data gravity model, we find that the higher the product complexity, the higher the volume of trade linked to international production networks, with the impact larger for EU Core countries that exhibit a wider set of high capabilities.

ANALISIS PENGARUH NON-TARIFF MEASURES EKSPOR KOMODITI CRUDE PALM OIL (CPO) INDONESIA KE NEGARA TUJUAN EKSPOR UTAMA

The study of this paper is aimed to evaluate the effects of non-tariff measures (NTM) upon Indonesian crude palm oil (CPO) export in the main destinations. Identified the competitiveness analysis using the Revealed Comparative Advantage index and the impact of the measures has estimated using a panel data gravity model constructed with disaggregated data about bilateral export trade flow of crude palm oil between Indonesia and its main trade partners for the period from 2003 to 2013. NTM represented binary variable that specified with a dummy variable. The gravity model has estimated with a fixed effects model and the results indicated that the existence of trade barriers to trade (TBT) appears to impede the Indonesian exports of CPO. But the existence of sanitary and phytosanitary measures (SPS) which related to food safety and the existence of trade remedy (antidumping, subsidy, safeguard) presented a positive impact upon the Indonesian exports of CPO. Keywords: Export, Non-Tariff Measures (NTM), Sanitary and Phytosanitary (SPS), Trade Barriers to Trade (TBT), Trade Remedy, Crude Palm Oil

ANALISIS PENGARUH NON-TARIFF MEASURES EKSPOR KOMODITI CRUDE PALM OIL (CPO) INDONESIA KE NEGARA TUJUAN EKSPOR UTAMA

The study of this paper is aimed to evaluate the effects of non-tariff measures (NTM) upon Indonesian crude palm oil (CPO) export in the main destinations. Identified the competitiveness analysis using the Revealed Comparative Advantage index and the impact of the measures has estimated using a panel data gravity model constructed with disaggregated data about bilateral export trade flow of crude palm oil between Indonesia and its main trade partners for the period from 2003 to 2013. NTM represented binary variable that specified with a dummy variable. The gravity model has estimated with a fixed effects model and the results indicated that the existence of trade barriers to trade (TBT) appears to impede the Indonesian exports of CPO. But the existence of sanitary and phytosanitary measures (SPS) which related to food safety and the existence of trade remedy (antidumping, subsidy, safeguard) presented a positive impact upon the Indonesian exports of CPO. Keywords: Export, Non-Tariff Measures (NTM), Sanitary and Phytosanitary (SPS), Trade Barriers to Trade (TBT), Trade Remedy, Crude Palm Oil

Analysis and projection of global iron ore trade: a panel data gravity model approach

In this study, an empirical model of global trade in iron ore is developed and applied. The empirical specification is based on the trade gravity theory in which the trade is determined by the income of the trading countries, the distance between the countries, and other characteristics of the countries. The model is specified allowing for country-specific effects. The estimation is performed with panel data for global bilateral iron ore trade flows from 1980 to 2016 including 121 countries and almost 14,000 observations. The results indicate a strong support of the gravity model hypotheses. On average, the trade value is projected to increase by approximately 5% per year up until 2035. The trade potential of iron ore is estimated to 410 million USD per year. Applied to forecasting and policy analysis, the results represent another worthwhile source of information providing an alternative view of the global trade in iron ore that can be helpful for decision-makers.

New Zealand business tourism

Business tourism has brought significant benefits to New Zealand’s tourism industry and economy. This study aims to provide a better understanding of the impact of economic uncertainty on New Zealand’s business tourism. The panel data gravity model and the maximally correlated portfolio are used to investigate the impacts of economic policy uncertainty (EPU) indices of New Zealand and its key trading partners, along with tourism and aviation-related factors, on New Zealand’s business tourist flows from 2008 to 2015. The findings suggest that two economic factors (New Zealand’s EPU index and bilateral trade volumes) and two noneconomic factors (flying distance and total direct flight seats) are statistically significant in explaining some of the variations in business tourism flows. The results have important policy implications for New Zealand’s policymakers in understanding business visitor demands and planning their tourism strategies.

The impacts of cultural values on bilateral international tourist flows: a panel data gravity model

This study explores the impacts of Hofstede’s six cultural dimensions on international tourist flows. A panel data gravity model was used to analyse bilateral tourist flows between 81 origin countries and 32 destination countries from 1995 to 2008. This model highlights cultural factors using the push and pull framework and explains their influence vis-a-vis self-image congruity theory, arousal theory, and cultural theory of risk. Results indicate that when controlling for the effects of distance, population, and GDP per capita, international tourists tend to flow out of countries with lower Power Distance, higher Individualism, lower Masculinity, higher Long-Term Orientation, and higher Indulgence. Countries with higher Individualism, lower Uncertainty Avoidance, and higher Indulgence tend to attract more international tourists. In the push and pull model, tourist source countries’ cultural values, such as low Power Distance, Individualism, Femininity, and Indulgence can be considered push factors in international travel, while destination countries’ cultural values of Individualism, Uncertainty Acceptance, and Indulgence act as pull factors. Self-image congruity theory is supported in the cultural dimension of Uncertainty Avoidance Index. Recommendations for destination marketing are made based on the findings.

The regional trade dynamics of Turkey: a panel data gravity model

ABSTRACTThis paper analyzes the Turkish export and import flows with regard to regional clusters (RCs) and bilateral trade costs (BTCs) by using a panel data gravity model. We study the role of RCs and BTCs in two complementary parts: in the first part, we use an unbalanced panel data for 180 countries over the period 1960–2012, compiled from the DOTS database. We extend these estimations by running the data at four different time intervals, each representing different economic or political regimes in Turkey. In the second part, we repeat the same exercise at sectoral level for 176 countries over the period 1994–2010, using the BACI database. Aggregate estimates show that the gravity model is very effective in explaining the export and import flows of Turkey and that all close-by regions, including EU27, have a significant impact on trade flows of Turkey. We also find that the EU Customs Union has a negative effect on Turkish exports and a positive effect on imports. Estimates at selected time intervals reinforce aggregate estimates and sectoral level analyses indicate that while some regions contribute positively in all or the majority of sectors, others contribute negatively or produce mixed results.

A Multifaceted Panel Data Gravity Model Analysis of Peru’s Foreign Trade

Abstract. Peru’s abundant natural resources and friendly trade policies have made the country a major economic player in both South America and the global community. Consequently, exports are playing an increasingly important role in Peru’s national economy. Indeed, growing from 13.1% as of 1994, exports now contribute approximately 21% of the GDP of Peru as of 2015.Given Peru’s growing global influence, the time is ripe for a thorough analysis of the most important factors governing its export performance. Thus, within the framework of the augmented gravity model of trade, this paper examines Peru’s export performance and attempts to identify the dominant economic factors that should be further developed to increase the value of exports. The analysis was conducted from three different aspects: (1) general economic parameters’ effect on Peru’s export value, (2) more specific analysis into a major specific trade good, copper, and (3) the impact that regional trade agreements have had on Peru’s export performance. Our panel data analysis results for each dataset revealed interesting economic trends and were consistent with the theoretical expectations of the gravity model: namely positive coefficients for economic size and negative coefficients for distance. This report’s results can be a reference for the proper direction of Peruvian economic policy so as to enhance economic growth in a sustainable direction. Keywords. Gravity model, Fixed effect, Random effect, Instrumental variables GMM regression, Exports, Copper, Panel data, Peru, Regional trade agreements. JEL. F10, F12, F40, F41.

Ex Tridenti Mercatus? Sea-power and maritime trade in the age of globalization

This paper tests an implication of the hypothesis that hegemons provide increased global stability and thus promote international commerce. Specifically, we measure the influence of naval power projections on global trade during the latter 19th and early 20th centuries, a time of relative peace and robust commercial activity. We use archival data on the navies of Britain, France, the United States and Germany, capturing longitudinal measures of ship deployment, tonnage, and ship personnel. First we develop an empirical naval arms race model, and demonstrate that the navies of Britain and France in particular responded rigorously to each other. We then use our estimates of naval power projected around the world by Britain and France to measure their effects on bilateral trade in a panel-data gravity model. Results indicate that while navies had some positive impact on their own nation's trade, other nations' trade suffered. Our results show that rather than bolster globalization, the first global arms race damaged commercial interests and lowered trade potential around the world.

Corruption and Foreign Direct Investment in Latin America: A Panel Gravity Model Approach

This paper employs a panel data gravity model to assess the impact of corruption on foreign direct investment in selected Latin American countries. Our results suggest that high levels of corruption are associated with high levels of FDI.

International stock market interdependence: Are developing markets the same as developed markets?

This paper uses a dynamic panel-data gravity model to explain the correlations between 40 markets from 1996 to 2010 using four types of market linkages: information capacity, financial integration, economic integration, and similarity in industrial structure. The mechanism of interdependence of developed markets and that of developing markets are heterogeneous: (1) information capacity and industrial structure similarity have significant impact on the correlations of a developed market with other markets; (2) economic integration drives the correlations of a developing market with other markets; (3) financial integration is important for interdependence among developed markets and that among developing markets, but not for that between developed and developing markets. The EMU has a significant positive impact on stock market integration from 1996 to 2002. This impact increases after the inauguration of the EMU in 1999 but does not increase further after the monetary transition being accomplished in 2002.

Governance and foreign direct investment in Latin America: A panel gravity model approach

It is widely argued that good governance is an important determinant of foreign direct investment (FDI). With the exception of studies of corruption, however, empirical research on the link between governance and FDI is limited, particularly in the context of Latin America. Moreover, recent studies by Bellos and Subasat (2012a and 2012b) suggest that poor governance is a source of attraction rather than a hurdle for multinational companies in selected transition countries. By employing a panel data gravity model, this article aims to verify these unusual and interesting results in the context of selected Latin American countries. Our results confirm that the FDI enhancement role of poor governance exists not only in the transition countries but also in Latin America.

Le régionalisme commercial en Asie orientale

Résumé Cet article vise à estimer l’impact des trois principaux accords de libre-échange est-asiatiques (Asean, Asean-Chine, Asean-Corée du Sud) sur le commerce intra-zone et extra-zone. Il s’appuie, pour ce faire, sur un modèle de gravité en données de panel doté de trois variables indicatrices régionales. Les résultats de ces estimations permettent de conclure que l’accord au sein de l’Asean favorise le commerce régional et multilatéral. L’accord Asean-Chine impacte positivement sur les flux intra-régionaux et permet la création d’exportations extra-régionales, mais aucun effet n’a été révélé sur les importations extra-régionales. L’accord Asean-Corée du Sud n’a, pour l’instant, aucun impact sur les flux commerciaux est-asiatiques.