Abstract
At the same time that the modern theory of international trade due to comparative advantage developed in the post-World War II era to explain the patterns of international trade using 2 × 2 × 2 general equilibrium models, a small and separate line of empirical research in international trade emerged to ‘explain’ statistically actual aggregate bilateral trade flows among large numbers of countries. Drawing upon analogy to Isaac Newton’s Law of Gravitation, these international trade economists noted that observed bilateral aggregate trade flows between any pair of countries i and j could be explained very well using statistical methods by the product of the economic sizes of the two countries (GDP i GDP j ) divided by the distance between the country pair’s major economic centers (DIST ij ). Specifically, these researchers conjectured that:
or
where PX ij is the value (in current prices) of the merchandise trade flow from exporter i to importer j, GDP i (GDP j ) is the level of nominal gross domestic product in country i (j), DIST ij is the bilateral physical distance between the economic centers of countries i and j, and ε ij is assumed to be a log normally distributed error term. In equation (2), ln refers to the natural logarithm. Intuition suggested that β1 > 0, β2 > 0, and β3 < 0. In the 1960s, equations (1) and (2) came to be known among international trade economists as the ‘gravity equation’ — owing to its obvious similarity to Newton’s gravity equation in physics.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Abrams, Richard K. (1980) ‘International trade flows under flexible exchange rates.’ Economic Review, Federal Reserve Bank of Kansas City, March, 3–10.
Aitken, Norman D. (1973) ‘The effect of EEC and EFTA on European trade: a temporal cross section analysis’, American Economic Review, vol. 63, No. 5, December, 881–92.
Alcala, Francisco, and Antonio Ciccone (2004) ‘Trade and productivity’, Quarterly Journal of Economics, vol. 119, No. 2, May, 613–46.
Alvarez, Fernando, and Robert E. Lucas, Jr. (2007) ‘General equilibrium analysis of the Eaton Kortum model of international trade’, Journal of Monetary Economics, vol. 54, 1726–68.
Amiti, Mary, and Katherine Wakelin (2003) ‘Investment liberalization and international trade’, Journal of International Economics, vol. 61, No. 1, October, 101–26.
Anderson, James E. (1979) ‘A theoretical foundation for the gravity equation’, American Economic Review, vol. 69, No. 1, March, 106–16.
Anderson, James E., and Douglas Marcouiller (2002) ‘Insecurity and the pattern of trade: an empirical investigation’, Review of Economics and Statistics, vol. 84, No. 2, May, 342–52.
Anderson, James E., and Eric van Wincoop (2003) ‘Gravity with gravitas’, American Economic Review, vol. 93, No. 1, March, 170–92.
— (2004) ‘Trade costs’, Journal of Economic Literature, vol. 42, September, 691–751.
Anderson, James E., and Yoto V. Yotov (2009) ‘The changing incidence of geography’, Working Paper, Boston College.
Arkolakis, Costas (2008) ‘Market penetration and the new consumers margin in international trade’, Working Paper, Yale University.
Badinger, Harald (2008) ‘Trade policy and productivity’, European Economic Review, vol. 52, July, 867–91.
Baier, Scott L., and Jeffrey H. Bergstrand (2001) ‘The growth of world trade: tariffs, transport costs, and income similarity’, vol. 53, No. 1, February, 1–27.
— (2002) ‘On the endogeneity of international trade flows and free trade agreements’, Working Paper, University of Notre Dame.
— (2004) ‘Economic determinants of free trade agreements’, Journal of International Economics, vol. 64, No. 1, October, 29–63.
— (2007) ‘Do free trade agreements actually increase members’ international trade?’ Journal of International Economics, vol. 71, No. 1, March, 72–95.
Baier, Scott L., Jeffrey H. Bergstrand and Erika Vidal (2007) ‘Free trade agreements in the Americas: are the trade effects larger than anticipated?’, The World Economy, vol. 30, No. 9, September, 1347–77.
Baier, Scott L., Jeffrey H. Bergstrand, Peter Egger and Patrick McLaughlin (2008) ‘Do economic integration agreements actually work? Issues in understanding the causes and consequences of the growth of regionalism’, The World Economy, vol. 31, No. 4, April, 461–97.
Baier, Scott L., and Jeffrey H. Bergstrand (2009a) ‘Bonus vetus OLS: a simple method for approximating international trade cost effects using the Gravity Equation’, Journal of International Economics, vol. 77, No. 1, February, 77–85.
— (2009b) ‘Estimating the effects of free trade agreements on international trade flows using matching econometrics’, Journal of International Economics, vol. 77, No. 1, February, 63–76.
Baldwin, Richard E. (2005) ‘The Euro’s trade effect’, paper prepared for a European Central Bank workshop.
Baldwin, Richard E., and James Harrigan (2007) ‘Zeros, quality and space: trade theory and trade evidence’, National Bureau of Economic Research Working Paper 13214, July.
Baldwin, Richard E., and Daria Taglioni (2007) ‘Trade effects of the Euro: a comparison of estimators’, Journal of Economic Integration, vol. 22, No. 4, December, 780.
Baltagi, Badi H., Peter Egger and Michael Pfaffermayr (2003) ‘A generalized design for bilateral trade flow models’, Economics Letters, vol. 80, 391–97.
— (2008) ‘Estimating regional trade agreement effects on FDI in an interdependent world’, Journal of Econometrics, vol. 145, 194–208.
Belderbos, Rene (1997) ‘Antidumping and tariff jumping Japanese firms’ DFI in the European Union and United States’, Weltwirtschaftliches Archiv, vol. 133, 419–57.
Bénassy Quéré, Agnès, Maylis Coupet and Thierry Mayer (2007) ‘Institutional determinants of foreign direct investment’, The World Economy, vol. 30, No. 5, May, 764–82.
Bergstrand, Jeffrey H. (1981) The Gravity Equation in International Trade. Ph.D. dissertation, Department of Economics, University of Wisconsin at Madison.
— (1985) ‘The Gravity Equation in international trade: some microeconomic foundations and empirical evidence’, Review of Economics and Statistics, vol. 67, No. 3, August, 474–81.
Bergstrand, Jeffrey H., and Peter Egger (2004) ‘A theoretical and empirical model of international trade and foreign direct investment with outsourcing: part 1, developed countries’, Working Paper, University of Notre Dame.
— (2007) ‘A knowledge and physical capital model of international trade flows, foreign direct investment, and multinational enterprises’, Journal of International Economics, vol. 73, No. 2, 278–308.
— (2009) ‘A general equilibrium theory for estimating gravity equations of bilateral FDI, final goods trade, and intermediate goods trade’, in S. Brakman and P. van Bergeijk (eds), The Gravity Model in International Trade: Advances and Applications. Cambridge: Cambridge University Press, forthcoming.
Bergstrand Jeffrey H., Peter Egger and Mario Larch (2008a) ‘Gravity redux: structural estimation of gravity equations, elasticities of substitution, and economic welfare under asymmetric bilateral trade costs’, Working Paper, University of Notre Dame.
— (2008b) ‘The New Expats: economic determinants of bilateral expatriate, FDI, and international trade flows’, Working Paper, University of Notre Dame.
Bernard, Andrew B., J. Bradford Jensen, Stephen J. Redding and Peter K. Schott (2009) ‘The margins of U.S. trade (long version)’, Working Paper CES 09 18, U.S. Census Bureau.
Blomberg, S., and Gregory D. Hess (2006) ‘How much does violence tax trade?’ Review of Economics and Statistics, vol. 88, No. 4, 599–612.
Blonigen, Bruce A. (2002) ‘Tariff jumping antidumping duties’, Journal of International Economics, vol. 57, No. 1, 31–50.
Blonigen, Bruce A., and Ronald Davies (2004) ‘The effects of bilateral tax treaties on U.S. FDI activity’, International Tax and Public Finance, vol. 11, 601–22.
Blonigen, Bruce A., Ronald Davies, Glen R. Waddell and Helen Naughton (2007) ‘FDI in space: spatial autoregressive relationships in foreign direct investment’, European Economic Review, vol. 51, No. 5, July, 1303–25.
Borjas, George J. (1994) ‘The economics of immigration’, Journal of Economic Literature, vol. 32, No. 4, December, 1667–1717.
— (1999) The economic analysis of immigration’, in O.C. Ashenfelter and David Card (eds), Handbook of Labour Economics. Amsterdam: Elsevier Science.
Brada, Josef C., and Jose A. Mendez (1985) ‘Economic integration among developed, developing, and centrally planned economies: a comparative analysis’, Review of Economics and Statistics, vol. 67, No. 4, November, 549–56.
Brainard, Lael S. (1997) ‘An empirical assessment of the Proximity Concentration Hypothesis trade off between multinational sales and trade’, American Economic Review, vol. 87, No. 4, September, 520–44.
Carey, H.C. (1865) Principles of Social Science. Philadelphia: J.B. Lippincott and Company.
Carr, David, James R. Markusen and Keith E. Maskus (2001) ‘Estimating the knowledge capital model of the multinational enterprise’, American Economic Review, vol. 91, No. 3, June, 693–708.
Carrère, Céline (2006) ‘Revisiting the effects of regional trade agreements on trade flows with proper specification of the Gravity Model’, European Economic Review, vol. 50, 223–47.
Chaney, Thomas (2008) ‘Distorted gravity: the intensive and extensive margins of international trade’, American Economic Review, vol. 98, No. 4, September, 1707–21.
Cheng, I. Hui, and Howard J. Wall (2005) ‘Controlling for heterogeneity in gravity models of trade’, Federal Reserve Bank of St. Louis Review, January/February, 49–63.
De, Prahir (2008) ‘Trade Costs and Infrastructure: Analysis of the effects of trade impediments in Asia’, Integration and Trade, No. 28, January–June, 241–65.
Desai, Mihir A., Fritz C. Foley and James R. Hines, Jr. (2004) ‘Foreign direct investment in a world of multiple taxes’, Journal of Public Economics, vol. 88, No. 12, 2727–44.
Disdier, Anne Celia, and Keith Head (2008) ‘The puzzling persistence of the distance effect on bilateral trade’, Review of Economics and Statistics, vol. 90, No. 1, February, 37–48.
Dixit, Avinash, and Joseph E. (1977) ‘Monopolistic competition and optimum product diversity’, American Economic Review, vol. 67, No. 3, June, 297–308.
Donaldson, David (2009) ‘Railroads of the Raj: estimating the impact of transportation infrastructure’, London School of Economics Working Paper, June.
Dornbusch, Rudiger, Stanley Fischer, and Paul A. Samuelson (1977) ‘Comparative advantage, trade, and payments in a Ricardian model with a continuum of goods’, American Economic Review, vol. 67, 823–39.
Dunlevy, James A., and William K. Hutchinson (1999) ‘The impact of immigration on American import trade in the late nineteenth and early twentieth centuries’, The Journal of Economic History, vol. 59, 1043–62.
Eaton, Jonathan, and Akiko Tamura (1994) ‘Bilateralism and regionalism in Japanese and U.S. trade and direct foreign investment patterns’, Journal of the Japanese and International Economies, vol. 8, No. 4, December, 478–510.
Eaton, Jonathan, and Samuel Kortum (2002) ‘Technology, geography, and trade’, Econometrica, vol. 70, 1741–80.
Egger, Peter (2000) ‘A note on the proper econometric specification of the Gravity Equation’, Economics Letters, vol. 66, 25–31.
— (2002) ‘An econometric view on the estimation of gravity models and the calculation of trade potentials’, The World Economy, vol. 25, 297–312.
— (2004) ‘On the problem of endogenous unobserved effects in the estimation of gravity models’, Journal of Economic Integration, vol. 19, 182–91.
Egger, Peter, and Michael Pfaffermayr (2003) ‘The proper panel econometric specification of the Gravity Equation: a three way model with bilateral interaction effects’, Empirical Economics, vol. 28, 571–80.
— (2004) ‘The impact of bilateral investment treaties on foreign direct investment’, Journal of Comparative Economics, vol. 32, 788–804.
Egger, Peter, Mario Larch, Kevin E. Staub and Rainer Winkelmann (2009) ‘The trade effects of endogenous preferential trade agreements’, Working Paper, University of Zurich.
Feenstra, Robert C. (2004) Advanced International Trade. Princeton: Princeton University Press.
— (2009) ‘Measuring the gains from trade under manopolistic competition’, National Bureau of Economic Research Working Paper No. 15593.
Feenstra, Robert C., James R. Markusen and Andrew K. Rose (2001) ‘Using the Gravity Equation to differentiate among alternative theories of trade’, Canadian Journal of Economics, vol. 34, No. 2, May, 430–47.
Felbermayr, Gabriel, and Wilhelm Kohler (2006) ‘Exploring the intensive and extensive margins of world trade’, Review of World Economics, vol. 142, 642–74.
Francois, Joseph, and Miriam Manchin (2007) ‘Institutions, infrastructure, and trade’, World Bank Policy Research Working Paper 4152, March.
Frankel, Jeffrey H. (1997) Regional Trading Blocs in the World Economic System. Washington, D.C.: Institute for International Economics.
Frankel, Jeffrey, and David Romer ‘Does trade cause growth?’ American Economic Review, vol. 89, No. 3, June, 379–99.
Frankel, Jeffrey, and Andrew K. Rose (2002) ‘An estimate of the effect of common currencies on trade and income’, Quarterly Journal of Economics, vol. 117, No. 2, May, 437–66.
Freeman, Richard B. (2006) ‘People flows in globalization’, Journal of Economic Perspectives, vol. 20, No. 2, Spring, 145–70.
Ghosh, Sucharita, and Steven Yamarik (2004) ‘Are regional trading arrangements trade creating? An application of extreme bounds analysis’, Journal of International Economics, vol. 63, No. 2, July, 369–95.
Gil, Salvador, Rafael Llorca and J. Antonio Martinez Serrano (2008) ‘Assessing the enlargement and deepening of the European Union’, The World Economy, vol. 31, No. 9, September, 1253–72.
Girma, Sourafel, and Zhihao Yu (2002) ‘The link between immigration and trade: evidence from the United Kingdom’, Weltwirtschaftliches Archiv, vol. 138, No. 1, 115–30.
Glick, Reuven, and Andrew K. Rose (2001) ‘Does a currency union affect trade? The Time Series evidence’, National Bureau of Economic Research Working Paper No. 8396, July.
Glick, Reuven, and Alan M. Taylor (2009) ‘Collateral damage: trade disruption and the economic impact of war’, Review of Economics and Statistics, forthcoming.
Globerman, Steven, and Daniel Shapiro (2002) ‘Global foreign direct investment flows: the role of governance infrastructure’, World Development, vol. 30, No. 11 1899–1919.
Gould, David (1994) ‘Immigrant links to the home country: empirical implications for U.S. bilateral trade flows’, Review of Economics and Statistics, vol. 76, No. 2, May, 302–16.
Gowa, Joanne, and Edward D. Mansfield ‘Power politics and international trade’, American Political Science Review, vol. 87, No. 2, June, 408–20.
Grazalian, Pascal L., and W. Hartley Furtan (2005) ‘The border effects: recognizing the role of FDI’, Working Paper, University of Saskatchewan.
Grigoriou, Christopher (2007) ‘Landlockedness, infrastructure, and trade: new estimates for central Asian countries’, World Bank Policy Research Working Paper 4335, August.
Grogger, Jeffrey, and Gordon H. Hanson (2008) ‘Income maximization and the selection and sorting of international migrants’, National Bureau of Economic Research Working Paper No. 13821.
Hanson, Gordon H. (2006) ‘Illegal migration from Mexico to the United States’, Journal of Economic Literature, vol. 44, No. 4, December, 869–924.
Hatton, Timothy J., and Jeffrey G. Williamson (2002) ‘What fundamentals drive world migration?’ National Bureau of Economic Research Working Paper No. 9159.
— (2005) Global Migration and the World Economy. Cambridge, MA: MIT Press.
Head, Keith, and John Ries (1998) ‘Immigration and trade creation: econometric evidence from Canada’, Canadian Journal of Economics, vol. 31, No. 1, February, 47–62.
— (2001) ‘Increasing returns versus national product differentiation as an explanation for the patter of U.S.-Canada Trade’, American Economic Review, vol. 91, No. 4, September, 858–76.
— (2008) ‘FDI as an outcome of the market for corporate control: theory and evidence’, Journal of International Economics, vol. 74, No. 1, January 2–20.
Helpman, Elhanan, and Paul Krugman (1985) Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
Helpman, Elhanan, Marc J. Melitz and Yona Rubinstein (2008) ‘Estimating trade flows: trading partners and trading volumes’, Quarterly Journal of Economics, vol. 123, No. 2, May.
Helpman, Elhanan, Marc J. Melitz and Stephen R. Yeaple (2004) ‘Export versus FDI with heterogeneous firms’, American Economic Review, vol. 94, No. 1, March, 300–16.
Hummels, David (1999) ‘Toward a geography of trade costs’, Working Paper, University of Chicago.
— (2001) ‘Time as a barrier to trade’, Working Paper, Purdue University.
— (2007) ‘Transportation costs and international trade in the second era of globalization’, Journal of Economic Perspectives, vol. 21, No. 3, 131–54.
Irac, Delphine (2004) ‘Distance and foreign direct investment: evidence from OECD countries’, Working Paper, Columbia University, March.
Isard, Walter (1954) ‘Location theory and trade theory: short run analysis’, Quarterly Journal of Economics, vol. 68, No. 2, May, 305–20.
Isard, Walter (1960) Methods of Regional Analysis: An Introduction to Regional Science. New York: John Wiley and Sons.
Isard, Walter, and Merton J. Peck (1954) ‘Location theory and international and interregional trade theory’, Quarterly Journal of Economics, vol. 68, No. 1, February, 97–114.
Kleinert, Jorn, and Farid Toubal (2005) ‘Gravity for FDI’, Working Paper, Georg August Universitat Gottingen.
Krugman, Paul (1979) ‘Increasing returns, monopolistic competition, and international trade’, Journal of International Economics, vol. 9, 469–79.
Lai, Huiwen, and Susan Chun (2006) ‘U.S. exports and multinational production’, Review of Economics and Statistics, vol. 88, No. 3, August, 531–48.
Leamer, Edward E., and Robert M. Stern (1970) Quantitative International Economics. Chicago: Aldine.
Lee, Jong Wha, and Philip Swagel (1997) ‘Trade barriers and trade flows’, Review of Economics and Statistics, vol. 79, 372–82.
Levy Yeyati, Eduardo, Ernesto Stein and Christian Daude (2002a) ‘Regional integration and the location of FDI’, Inter American Development Bank Working Paper.
— (2002b) ‘The FTAA and the location of foreign direct investment’, Inter American Development Bank Working Paper.
Limäo, Nuno, and Anthony J. Venables (2001) ‘Infrastructure, geographical disadvantage, transport costs, and trade,’ The World Bank Economic Review, vol. 15, No. 3, 451–79.
Linnemann, Hans (1966) An Econometric Study of International Trade Flows. Amsterdam: North Holland.
Markusen, James R. (1984) ‘Multinationals, multi plant economies, and the gains from trade’, Journal of International Economics, vol. 16, 206–26.
— (2002) Multinational Firms and the Theory of International Trade. Cambridge, MA: MIT Press.
Markusen, James R., and Anthony J. Venables (1998) ‘Multinational firms and the new trade theory’, Journal of International Economics, vol. 46, 183–203.
— (2000) ‘The theory of endowment, intra industry and multinational trade’, Journal of International Economics, vol. 52, December 209–34.
Mansfield, Edward D., and Rachel Bronson (1997) ‘Alliances, preferential trading arrangements, and international trade’, American Political Science Review, vol. 91, No. 1, 94–107.
Mansfield, Edward D., Helen V. Milner and B. Peter Rosendorff (2000) ‘Free to trade: democracies, autocracies, and international trade’, American Political Science Review, vol. 94, No. 2, June, 305–21.
Martin, Phillipe, Thierry Mayer and Mathias Thoenig (2008) ‘Make trade, not war’, Review of Economic Studies, vol. 75, No. 3, 865–900.
Mátyás, László (1997) ‘Proper econometric specification of the Gravity Model’, The World Economy, vol. 20, No. 3, 363–68.
McCallum, John (1995) ‘National borders matter: Canada-US regional trade patterns’, American Economic Review, vol. 85, No. 3, September, 615–23.
Melitz, Marc J. (2003) ‘The impact of trade on intra industry reallocations and aggregate industry productivity’, Econometrica, vol. 71, No. 6, November, 1695–1725.
Moneta, Carmellah (1959) ‘The estimation of transport costs in international trade’, Journal of Political Economy, vol. 67, No. 1, February, 41–58.
Mutti, John, and Harry Grubert (2004) ‘Empirical asymmetries in foreign direct investment and taxation’, Journal of International Economics, vol. 62, 337–58.
Niedercorn, John H., and Burley V. Bechdolt, Jr. (1969) ‘An economic derivation of the “Gravity Law” of spatial interaction’, Journal of Regional Science, vol. 9, 273–82.
Niedercorn, John H., and Josef D. Moorehead (1974) ‘The commodity flow gravity model: a theoretical reassessment’, Regional and Urban Economics, vol. 4, 69–75.
Norbäck, Pehr Johan, Dieter Urban and Stefan Westerberg (2007) ‘The economics of multinational firms’, CESifo Working Paper, June.
Olsen, Erling (1971) International Trade Theory and Regional Income Differences: United States 1880–1950. Amsterdam: North Holland.
Polachek, Solomon W. (1980) ‘Conflict and trade’, Journal of Conflict Resolution, vol. 24, No. 1, March, 55–78.
Polachek, Solomon W., and Carlos Seiglie (2006) ‘Trade, peace, and democracy: an analysis of dyadic dispute’, Institute for the Study of Labour (IZA) Working Paper 2170, June.
Pollins, Brian M. (1989) ‘Conflict, cooperation, and commerce: the effect of international political interactions on bilateral trade flows’, American Journal of Political Science, vol. 33, No. 3, August, 737–61.
Pöyhönen, Pentti (1963a) ‘A tentative model for the volume of trade between countries’, Weltwirtschaftliches Archiv, Band 90, Heft 1, 93–100.
— (1963b) ‘Toward a general theory of the international trade’, Economiska Samfundets Tidskrift, vol. 16, 69–77.
Pulliainen, Kyosti (1963) ‘A world trade study: an econometric model of the pattern of the commodity flows of international trade in 1948–60’, Economiska Samfundets Tidskrift, vol. 16, 78–91.
Rauch, James E. (1999) ‘Networks versus markets in international trade’, Journal of International Economics, vol. 48, 7–35.
— (2001) ‘Business and social networks in international trade’, Journal of Economic Literature, vol. 39, December, 1177–1203.
Rauch, James E., and Vitor Trindade (2002) ‘Ethnic Chinese networks in international trade’, Review of Economics and Statistics, vol. 84, No. 1, February, 116–30.
Ravenstein, Ernest G. (1885) ‘The laws of migration: part 1’, Journal of the Royal Statistical Society, vol. 48, 167–227.
— (1889) ‘The laws of migration: part 2’, Journal of the Royal Statistical Society, vol. 52, 241–301.
Reuveny, Rafael, and Heejoon Kang (2003) ‘A simultaneous equations model of trade, conflict, and cooperation’, Review of International Economics, vol. 11, No. 2, May, 279–95.
Rose, Andrew K. (2000) ‘One money, one market: estimating the effect of common currencies trade’, Economic Policy, vol. 30, 7–46.
Santos Silva, J.M.C., and Silvana Tenreyro (2006) ‘The log of gravity’, Review of Economics and Statistics, vol. 88, No. 4, 641–58.
Sapir, André (1981) ‘Trade benefits under the EEC Generalized System of Preferences’, European Economic Review, 15, 339–55.
Savage, I. Richard, and Karl W. Deutsch (1960) ‘A statistical model of the gross analysis of transaction flows’, Econometrica, vol. 28, 551–72.
Schatz, Howard J., and Anthony J. Venables (2000) ‘The geography of international investment’, World Bank Policy Research Working Paper 2338, May.
Sen, Ashish, and Tony E. Smith (1995) Gravity Models of Spatial Interaction Behavior. Berlin: Springer.
Shepherd, Ben, and John S. Wilson (2007) ‘Trade, infrastructure, and roadways in Europe and Central Asia: new empirical evidence’, Journal of Economic Integration, vol. 22, No. 4, December, 723–47.
Shim, Kieun (2005) ‘Border effects and FDI: can FDI explain the border puzzle?’ Working Paper, University of Virginia.
Smith, Pamela J. (2001) ‘How do foreign patent rights affect U.S. exports, affiliate sales, and licenses?’ Journal of International Economics, vol. 55, 411–39.
Summary, Rebecca (1989) ‘A political economic model of U.S. bilateral trade’, Review of Economics and Statistics, vol. 71, No. 1, February, 179–82.
Stein, Ernesto, and Christian Daude (2007) ‘Longitude matters: time zones and the location of foreign direct investment’, Journal of International Economics, vol. 71, 96–112.
Stewart, John Q. (1948) ‘Demographic gravitation: evidence and applications’, Sociometry, vol. 11, No. 1/2, February/May, 31–58.
Swenson, Deborah L. (1994) ‘The impact of U.S. tax reform on foreign direct investment in the United States’, Journal of Public Economics, vol. 54, No. 2, 243–66.
Thursby, Jerry G., and Marie C. Thursby ‘Bilateral trade flows, the Linder Hypothesis, and exchange risk’, Review of Economics and Statistics, vol. 69, No. 3, August, 488–95.
Tinbergen, Jan (1962) Shaping the World Economy: Suggestions for an International Economic Policy. New York: The Twentieth Century Fund.
Van Beers, Cees (1998) ‘Labour standards and trade flows of OECD countries’, The World Economy, vol. 21, No. 1, January, 57–73.
Van Bergeijk, Peter, and Harry Oldersma (1990) ‘Detente, market oriented reform, and German unification: potential consequences for the world trade system’, Kyklos, vol. 43, No. 4, 599–609.
Westerlund, Joakim, and Fredrik Wilhelmsson (2009) ‘Estimating the gravity model without gravity using panel data’, Applied Economics, vol. 41, 1–9.
Yeaple, Stephen Ross (2005) ‘A simple model of firm heterogeneity’, Journal of International Economics, vol. 65, No. 1, January, 1–20.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2013 Jeffrey H. Bergstrand and Peter Egger
About this chapter
Cite this chapter
Bergstrand, J.H., Egger, P. (2013). Gravity Equations and Economic Frictions in the World Economy. In: Bernhofen, D., Falvey, R., Greenaway, D., Kreickemeier, U. (eds) Palgrave Handbook of International Trade. Palgrave Macmillan, London. https://doi.org/10.1007/978-0-230-30531-1_17
Download citation
DOI: https://doi.org/10.1007/978-0-230-30531-1_17
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-137-35180-7
Online ISBN: 978-0-230-30531-1
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)