Gravity Model Of Trade Research Articles

Impact of Ebola Virus Disease and ECOWAS Membership on Intra-Regional Trade in West Africa

The West African sub-region bore the brunt of the world's largest Ebola outbreak, significantly impacting the economic activities and trade shares of the affected countries. This study seeks to examine the repercussions of the Ebola Virus Disease (EVD) on the trade shares of affected countries and to explore the potential influence of ECOWAS membership on intra-regional trade in West Africa. Using the Poison Pseudo Maximum Likelihood (PPML) estimation technique, an analysis of the augmented gravity model of international trade was conducted. The findings indicate a two-fold reduction in the trade shares of affected countries with their intra-regional partners due to the Ebola Virus Disease. Additionally, with Mauritania expressing its desire to join the ECOWAS sub-region, there is a need to explore the impact of the Regional Economic Community on intra-regional trade. Furthermore, the study reveals that ECOWAS membership has the potential to double trade levels in West Africa. The findings also suggest that Mauritania stands to gain significant benefits from becoming a member of the ECOWAS. In conclusion, this study highlights the necessity for ECOWAS to proactively respond to disease outbreaks and underscores the importance of increased research investment. Moreover, it emphasizes the need for the ECOWAS to further improve infrastructure to facilitate intra-regional trade, especially in transportation.

Assessing the impact of the European Union-Vietnam free trade agreement on labor market and employment in Vietnam

PurposeThis study investigates the impact of the European Union-Vietnam Free Trade Agreement (EVFTA) on Vietnam’s labor market and employment outcomes, considering the potential distributional consequences across various groups of workers and regions.Design/methodology/approachA comprehensive quantitative framework is employed, combining the gravity model of trade to estimate the EVFTA’s effects on trade flows, the CISAF_M1 model to simulate sectoral employment impacts and econometric models to analyze the effects on wages and decent work. The analysis draws upon a rich dataset spanning the period before and after the EVFTA’s implementation.FindingsThe EVFTA has significantly boosted Vietnam’s exports to the EU, leading to substantial job creation in labor-intensive sectors such as textiles, apparel and footwear. The agreement has also contributed to wage growth and improved access to social insurance for workers in export-oriented industries. However, the impact on other aspects of job quality is less clear. The distributional analysis reveals that the EVFTA’s employment effects have been relatively balanced across gender but have favored younger and less skilled workers as well as those in rural areas.Originality/valueThis study provides a comprehensive and nuanced assessment of the EVFTA’s impact on Vietnam’s labor market, addressing a gap in the literature on the employment effects of new-generation free trade agreements in developing countries. The findings highlight the importance of considering distributional aspects when evaluating the socioeconomic implications of trade liberalization and offer valuable insights for policymakers aiming to promote inclusive growth in the context of deepening international economic integration.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-03-2024-0236

How China can promote the outer circular economy under policy uncertainty

This paper utilizes the trade gravity model under the “double-cycle” pattern and selects the trade and export panel data of China in general and 31 provinces and cities located on mainland China specifically to the U.S. from 2008 to 2022 to analyze not only the reasons for the emergence of trade friction shocks between China and the U.S. but also the effects of trade friction shocks on trade between China and the U.S. and the characteristics of each market's export potential. The results of the study reveal that the volume of China's secondary industry GDP and the U.S. economic freedom index play a positive role in promoting China‒U.S. trade, while the volume of the U.S. GDP, the U.S. population, the trade distance between China and the U.S., and the number of U.S.‒China trade barrier notifications impede China‒U.S. trade. Furthermore, on the basis of the measurement of the trade potential equation, the provinces and municipalities of China's mainland are classified into the U.S. trade and export markets, and ways and means are sought to improve the potential of China's trade and exports with the U.S. Moreover, on the basis of the trade potential equation, China in general and the mainland provinces and cities specifically are divided into export markets to the U.S. to find ways to increase China's trade and export potential to the U.S. and promote China's “outward circulation” economy.

Fly the unfriendly skies: The role of transport costs in gravity models of trade

We exploit exogenous shocks to flight distances over time to estimate the distance effect in airborne trade within panel regressions. We find a negative distance effect, which we interpret as evidence of a link between transportation costs and airborne trade. Notably, this relationship is driven almost entirely by changes at the extensive margin. Specifically, trade in HS 6 product categories with intermittent trading histories becomes dormant when flight distances increase. Conversely, the intensive margin of trade remains largely unaffected.

Maximizing Trade Benefits Through Strategic WTO Dispute Filings: A Quantitative Analysis of Optimal Initiation

The study investigates the asymmetrical distribution of bilateral dispute initiations at the World Trade Organization Dispute Settlement System (WTO-DSS) between specific country pairs. The study introduces a novel concept of dispute depth to examine how the asymmetrical bilateral dispute initiation affects bilateral trade among disputing dyads and to optimize the number of disputes that a country should file to maximize its trade benefit. By using the augmented Structural Gravity Model of trade and the PPMLHDFE estimator with extensive trade data for the years 1995–2022, across selected WTO member countries, the article demonstrates that an increase in the dispute depth decreases the bilateral trade between disputing dyads. Further, the study finds that the WTO member countries should strategically file no more than three disputes per year to maximize their trade gains. The study has important ramifications in the ambiguous world of WTO-DSS and paves the way for implementing the optimal number of disputes into trade dispute strategy, policy-making decisions and business environment of the constantly evolving international trade landscape.

The impact of international logistics performance on import and export trade: an empirical case of the “Belt and Road” initiative countries

As an important foundation of cargo transportation, logistics plays a vital role in developing international trade. Based on the international logistics performance index (LPI) and the sample data of the “Belt and Road” initiative countries from 2011 to 2022, this paper uses the extended trade gravity model to explore the impact of the logistics performance of the “Belt and Road” initiative countries on China’s import and export trade. The empirical results show that the improvement of the logistics performance level of the countries along the “Belt and Road” Initiative has a certain role in promoting the growth of China’s trade volume to the country, and the improvement of LPI has a more significant positive impact on China’s import and export to large-scale countries along the route. Finally, according to the analysis of empirical results, this paper puts forward specific suggestions to promote the development of logistics performance and import and export trade, which provides some reference value for implementing the “Belt and Road” initiative and improving national logistics and trade level.

Analysis of Albania’s Trade Direction: Is the Open Balkan a New Center of Gravity?

Trade is considered one of the main drivers of a country’s economic growth and development. Therefore, a successful analysis that identifies the bilateral trade flows, their determinants, and the regional integration costs and benefits opens new horizons for international trade perspectives. This study examines the effects of new and existing regional agreements on the international trade patterns of Western Balkan countries based on the Albanian case. In this regard, an extended trade gravity model is applied with a panel data set of trade flows between Albania and 43 of its regional strategic partners during the period of 2008 to 2022. This work considers two different similarity indexes to explain the effect of the economic structures of partner countries on their trade volumes: the relative factor endowment and the absolute factor endowment. The first is used to test the Linder Hypothesis, and the latter is used to test the effect of similarity in economic size between trading partners. Empirical results indicate that the effect of the selected explanatory variables, such as transportation costs, economic size, economic strength, exchange rate, and their relative as well as absolute endowment, is within expectations. Unexpectedly, the domestic economic size and strength are found to be insignificant in explaining the import flows and inversely proportional to the exports of Albania. Finally, it is indicated that trade flows are clearly dependent on traditional ties rather than on new incentives like the Open Balkan, which cannot offer a new regional center of gravity. To the best of our knowledge, this is the first time that the gravity of the Open Balkan initiative has been tested for one of the participating countries. The study concludes that while the Open Balkan initiative shows potential, the Berlin Process remains a more reliable path toward EU integration for Albania.

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

PurposeThis study aims to unveil the variables that drive Indonesia’s seafood exports to organization of Islamic cooperation (OIC) countries, including a deeper analysis to understand the factors that affect Indonesia’s potential for halal seafood exports, and attempts to validate Linder’s hypothesis, which might occur as part of the determinants of Indonesia’s seafood exports, as well as one of the variables that can affect Indonesia’s potency of halal seafood exports based on economic scale similarities and relative factor endowments.Design/methodology/approachUsing Poisson regression by pseudo maximum likelihood, this study applies the theory of trade gravity and Linder’s hypothesis of Indonesia’s seafood exports to OIC countries and its halal market potency over the 30 years observation period from 1992 to 2021, with 47 countries importing Indonesia’s seafood products during the observation period based on United Nations Comtrade statistics.FindingsThe variables that drive Indonesia’s seafood exports are the situation of the economy between Indonesia and its trading partners, the population of importing countries and the common understanding of language. On the other hand, the adjusted-Muslim GDP of importing countries, the adjusted-Muslim GDP of Indonesia and the number of Muslim inhabitants of importer countries are the factors that affect Indonesia’s potential for halal seafood exports. The study also validates the presence of Linder’s hypothesis in Indonesia’s seafood export and could hint Indonesia’s potential for halal seafood exportsResearch limitations/implicationsOwing to the absence of an Harmonized System code that explicitly accommodates trade in halal commodities, especially in halal seafood exports, it will be more accurate if data are available in the future as material for further studies. Future studies may also consider per capita consumption of seafood, food safety standards and the level of food security from OIC countries as variables that might also influence Indonesia’s seafood exports in an approach analysis using the gravity theory of trade.Practical implicationsThis study is part of the authors’ efforts to encourage a greater contribution of the fisheries sector to Indonesia’s GDP by identifying the factors that drive seafood exports, which have so far only been around 2%–3% and have never reached more than 4% in the past two decades. While Indonesia is blessed with extraordinary marine biodiversity and hopes of being the leader of the halal food industry, the fisheries sector is expected to contribute.Originality/valueUnlike previous studies that used the approach of the gravity model of trade on food exports, this study is specifically in the field of seafood exports, takes Indonesia as the main object of research and also examines Linder’s hypothesis as part of the analysis to identify what drives Indonesia’s seafood exports in the OIC countries market and fill the scant of studies highlighting the factors that could drive halal food exports, specifically in seafood.

Do institutions matter for agri-food imports and exports between China and Africa? A gravity model analysis

This paper aims to study the role of institutional quality on agri-food trade (import and export) between China and 48 African countries during the 2001-2021 period. The gravity model of trade was employed by estimating the Generalised Least Square (GLS) and the Poisson Pseudo-Maximum Likelihood (PPML) estimators, which include zero trade flows for panel data. The main results show that voice and accountability, control of corruption, and the rule of law all enhance agri-food trade flows. While political instability encourages agri-food exports to China. In addition, the economic size of China, the trade cost (distance), and the population of African countries also encourage agri-food trade between China and African economies. Moreover, access to the sea, exchange rate policy, and the economic size of African nations deplete China’s agri-food imports from Africa. We showed the mechanism through which each institutional variable affects China’s agri-food trade flows to African nations.

A Gravity Model Analysis of China’s Bilateral Trade Flows: The Role of Free Trade Agreements and Exchange Rates

In the field of International Economics, the gravity model of trade has been one of the most successful empirical models guiding trade-policy decisions by nations. This paper aims to incorporate the theoretical foundations into the real world of trade flows between China and rest of the countries. An augmented gravity model is applied to study the impact of two variables, free trade agreements and nominal effective exchange rate on bilateral trade flows. Multiple regression analysis is carried out on a panel data consisting of trade flows with 224 countries from 1992-2015. The estimated results reveal a positive and significant influence of FTA on exports and imports. NEER displays a positive, though not significant, relationship with China’s imports and negative with exports.

Study on the current situation and influencing factors of corn import trade in China – based on the trade gravity model

Abstract With the rapid development of China’s economy and society, the income level of Chinese residents is increasing day by day, and the dietary consumption structure of domestic residents is constantly optimized and upgraded. The consumption demand for livestock products such as meat, eggs and milk, and corn starch industrial products is increasing day by day. Therefore, as the main raw material of feed industry and deep processing owners, the consumption scale of China corn market is constantly expanding. However, the corresponding domestic corn production scale has not expanded, and the domestic corn production presents an obvious problem of insufficient supply scale, which leads to a sharp and rapid increase in the number of corn imports in China, which seriously impacts the domestic corn market and affects China’s healthy development of corn industry. In recent years, the continuous spread of the COVID-19 epidemic has seriously affected the global grain production and trade. The fierce military conflict between Russia and Ukraine, the two major grain exporting countries, has once again brought a serious adverse impact on the supply and price of the global grain market, resulting in an increase in the import cost of corn in China and a change in the import pattern of corn in China. In this regard, this study analyzes the current situation of corn production and import trade in China, and based on the relevant trade data between China and major corn importing countries from 2013 to 2022, establishes a trade gravity model to quantitatively evaluate the main factors affecting China’s corn import trade, and analyzes the trade potential of sample countries. It was found that in 2022, China’s import and export trade volume and trade value were 20.62 million tons and 7.11 billion US dollars, respectively, compared with 2013, trade volume and trade volume increased by 6.3 times. Statistics on the potential types of various trading countries showed that the proportion of potential countries was 14.2%, and Brazil had the greatest potential in China’s corn import trade. The proportion of potential expanding countries is about 71.4%, and Laos is a mature country with less opportunities for further development. In order to promote the benign development of the domestic corn industry and the development of China’s corn import trade, this paper puts forward a series of countermeasure suggestions based on the above research.

An inquiry into the effect of trade facilitation on China's digital product exports to countries along the "Belt and Road"

We assess the trade facilitation level of 141 countries involved in the "Belt and Road" by constructing 4 primary indicators and 18 secondary indicators, and use the trade gravity model to explore its impact on China's digital product exports. The research results show that the overall level of trade facilitation is relatively low, and there is still plenty of room for improvement. The estimation results show that trade facilitation does improve the performance of China's digital exports, especially in terms of infrastructure construction and customs environment, while the impact of regulatory environment and finance & e-commerce on export performance is limited. The findings of this paper imply that promoting the continuous improvement in the level of trade facilitation is important for promoting China's digital product exports.

Relatedness and product complexity meet gravity models of international trade

Researchers have long used gravity models to analyze international trade patterns, identify export opportunities, and negotiate trade agreements. Recent research has emphasized the significance of relatedness and product complexity research in developing robust economic development strategies. This paper presents a novel approach, incorporating relatedness and product complexity as integral elements for interpreting export potential within gravity models powered by machine learning. Our approach stands out for its proficiency in accurately predicting bilateral trade values at a detailed product group level, providing valuable insights for policymakers and other stakeholders. The research leverages random forest machine learning models for predictions and incorporates relatedness and complexity to reveal new dimensions in international trade analysis.

Research on Alternative Relationship between Chinese Renewable Energy and Imported Coal for China

The issue of energy security in the new development paradigm featuring dual circulation has been paid attention to by all sectors, but at present, there are few results from relevant quantitative analyses. With a focus on China’s actual energy trade, this research examines the core elements of energy security in international and Chinese cycles. In this context, the “gravity model” and “Allen substitution elasticity” are optimized and expanded. An integrated assessment methodology is developed as a result of this effort. This methodology consists of an international-cycle trade gravity model and a Chinese-cycle price elasticity model. Additionally, it empirically analyzes the effects of China’s renewable energy substitution from the perspective of the “dual cycles” of energy security, and illustrates the current state of China’s energy security through the analysis of energy substitution relationship data. The results show that Chinese renewable energy does have a buffer effect on imported coal in terms of trade efficiency, scale, and behavior, as well as performance, and the energy trade price has a direct guiding significance for this buffer function, but the enhancement function of economy-driven efficiency is indirect. Furthermore, as far as the absolute price elasticity and net price elasticity are concerned, although Chinese wind power generation is a substitute for imported coal, its price elasticity also confirms that Chinese wind power generation is not a “normal commodity”. Moreover, at present, Chinese photovoltaic power generation shows the attribute of a “normal commodity”, but it has a certain degree of complementarity with imported coal, although this complementarity will weaken in the near future with the trend of changing to substitution.

Cultural affinity and international trade in motion pictures: Empirical evidence using categorised internet search activity

It is well established that cultural affinity between countries affects international trade patterns. To date, most research on this topic has only considered cultural affinity between a pair of countries as a single measure that is static over time. In this paper, we introduce a novel bi-directional and time-varying measure of cultural affinity and examine its relevance to sectoral trade with an application to the motion picture industry. Using Google Trends search topics related to countries, and specific to the ‘Arts and Entertainment’ category, we construct a measure of ‘relative search interest’ (RSI) as a proxy for cultural affinity. We incorporate this proxy into a structural gravity model of motion picture trade and find that a one percent increase in RSI is associated with a 0.2–0.4 percent increase in box office revenue flow. Our analysis suggests that RSI in other categories can provide useful insights in other industries.

The impact of China’s One-Belt One-Road initiative on international trade and global value chains

ABSTRACT This study examines the potential effects of China’s ‘One-Belt One-Road’ initiative (OBOR) on trade flows and global value chain (GVC) connections. The empirical analysis is based on the augmented trade gravity model, which comprises 186 economies and 199 of their partners from 2000 to 2018. We also estimate the gravity model for involvement in GVC (domestic value added in intermediate exports, foreign value added in exports, and one country’s contributed value in another’s total exports). OBOR proves to be positively correlated with international trade and GVC, while some corridors seem to benefit more than others (e.g. China-Pakistan, China-Mongolia-Russian Federation, and Bangladesh-China-India-Myanmar).

The Influencing Factors of Exports of Sichuan under the Belt and Road Initiative: An Empirical Study Based on the Extended Trade Gravity Model

This study investigates the influencing factors of exports in Sichuan Province in the context of the Belt and Road Initiative. Based on the panel data of Sichuan's exports to fifty-three countries along the Belt and Road from 2011 to 2022, this study tests eleven potential influencing factors using an expanded trade gravity model. And the results show that the economic development level of both Sichuan and the Belt and Road member countries have significant positive correlation with the export volume; while the distance, foreign merchant participation in Sichuan, exchange rate of RMB and human capital level of Sichuan are significantly negative. Moreover, the trade potential coefficient of each Belt and Road member country is calculated to decide the trade type. Lastly, the c onclusions and strategical suggestions are put up to further explore the trade potential with Belt and Road countries and expand Sichuans export volume.

Is the proliferation of private standards acting as a non-tariff trade barrier in agrifood trade? Evidence from Chilean grape exports

PurposeThe purpose of this paper is to describe and analyze the impacts that the recent proliferation of private and overlapping standards is having in the trade of agricultural products from developing countries.Design/methodology/approachIn a first stage industry experts in the Chilean fresh fruit trading industry were interviewed to understand the perceived impact that private standards are imposing in the industry. These interviews allowed to identify the market case study, table grapes, the landscape of private standards and their prevalence in different countries. In a second stage, a gravity trade model for trade in table grapes was estimated, with a focus on the more stringent countries identified by experts in the first stage.FindingsWe show evidence that the proliferation of private standards required by large European retailers has diverted trade away from more stringent countries that require more certifications (and into less stringent European markets). We also show that the costs of these additional certifications have been shared by trading partners, via an increase in direct sales, as opposed to consignment (the traditional marketing mode), which is associated with higher prices.Research limitations/implicationsThe impacts of the recent proliferation of private and overlapping standards in international trade needs to be better understood both by the legal and economic literature. While the use of private standards has been growing since the 1990s, there is a recent trend of large European retailers imposing their own and overlapping standards that needs to be better understood to inform policy.Originality/valueWhile there is a thin literature on the impact of private standards on trade, most of this has studied the effects of the now de facto mandatory GlobalGAP certification. However, there is a recent trend by large European retailers of demanding their own private certifications, together with other already existing overlapping private standards. This study describes and analyzes the impacts of this rather new trend.

Analysis of Malaysia's Export Potential of Palm Oil and Its Products to RCEP Member Countries

This study explores the export potential of the Malaysian palm oil industry to RCEP (Regional Comprehensive Economic Partnership) member countries based on the regional economic framework. The panel data from 2018 to 2022 were analyzed using the Trade Gravity Model, RCA (Revealed Comparative Advantage), and TCI (Trade Complementarity Index) indices. The results categorize the fifteen RCEP member countries into three potential classes based on the type of potential. In addition, it was found that the trade complementarity of RCEP member countries showed a significant positive correlation with the export size of Malaysian palm oil and its products. The study provides insights into the trade pattern of palm oil in the region and provides a valuable reference for future trade policy formulation and industry development and provides a basis for research related to the sustainable development of the Malaysian palm oil industry.

The Impact of Culture Distance on China’s Trade Exports to the 58 Countries along the “Belt and Road”

Culture, as an informal system, has received extensive attention from scholars in international trade involving cross-cultural exchanges. Starting from Hofstede’s theory of the six dimensions of culture, this paper empirically verifies the impact of culture distance on China’s exports to the 58 countries along the “Belt and Road” by using the trade gravity model. The study finds that culture distance has a first inhibiting and then promoting “U” shape effect on China’s trade exports to countries along the “Belt and Road”, and that culture distance has a heterogeneous effect on China’s trade exports to countries in terms of the categories of products and the target countries’ income levels. In addition, culture interaction activities like Friendship Cities and Confucius Institutes can positively moderate the influence of culture distance on China’s trade export.