Commercial Relations Between Colombia and the European Union: An Empirical Approximation in the Light of the Gravity Model

Part of the Contributions to Economics book series (CE)


The current chapter examines the impact of the European Generalized System of Preferences on Colombian exports over the period 1990–2008. Based on the gravity model of international trade, an augmented gravity equation is tested, capturing economic, geographic, cultural, and institutional factors that are believed to exert an influence upon Colombian trade. The findings indicate that Colombian exports have positively benefited from the unilateral scheme of preferences offered by the European Union, and that this trade mechanism had a large and positive effect on Colombian exports within the period of time analyzed. But, as will be addressed in a next section, this is not synonymous to a more diversified export basket with the EU.


Gravity Model Trade Partner Bilateral Trade Fixed Effect Estimation Gravity Equation 


  1. Agostino M, Aiello F, Cardamone P (2008) Evaluating the impact of non-reciprocal trade preferences using gravity models. Appl Econ. doi: 10.1080/00036840802314614 Google Scholar
  2. Aiello F, Demaria F (2010) Do trade preferential agreements enhance the exports of developing countries? Evidence from the EU GSP. Munich Pers RePEc Arch 20093:1–32Google Scholar
  3. Amemiya T, MaCurdy TE (1986) Instrumental-variable estimation of an error components model. Econometrica 54:869–881CrossRefGoogle Scholar
  4. Anderson JE (1979) A theoretical foundation for the gravity equation. Am Econ Rev 69:106–116Google Scholar
  5. Anderson JE, van Wincoop E (2003) Gravity with gravitas: a solution to the border puzzle. Am Econ Rev 93(1):170–192CrossRefGoogle Scholar
  6. Baldwin R Taglioni D (2006) Gravity for dummies and dummies for gravity equations. NBER Working Paper Series (Working Paper 12516), pp 1–31Google Scholar
  7. Baltagi BH (2008) Econometric analysis of panel data, 4th edn. John Wiley & Sons Ltd., Chippenham, Wiltshire, UKGoogle Scholar
  8. Batra A (2004) India’s global trade potential: the gravity model approach. Indian Council for Research on International Economic Relations, Working Paper 151:1–38Google Scholar
  9. Baum CF (2006) An introduction to modern econometrics using stata. Stata Press, College Station, Texas, USAGoogle Scholar
  10. Belke A, Spies J (2008) Enlarging the EMU to the east: what effects on trade? Empirica 35(4):369–389CrossRefGoogle Scholar
  11. Bergstrand JH (1985) The gravity equation in international trade: some microeconomic foundations and empirical evidence. Rev Econ Stat 67(3):474–481CrossRefGoogle Scholar
  12. Bergstrand JH (1989) The generalized gravity equation, monopolistic competition, and the factor-proportions theory in international trade. Rev Econ Stat 71:143–153CrossRefGoogle Scholar
  13. Bergstrand JH (1990) The Heckscher-Ohlin-Samuelson model, the Linder Hypothesis and the determinants of bilateral intra-industry trade. Econ J 100:1216–1229CrossRefGoogle Scholar
  14. Brun J, Carrère C, Guillaumont P, de Melo J (2005) Has distance died? Evidence from a panel gravity model. The World Bank Economic Review 1–22Google Scholar
  15. Cafiero JA (2005) Modelos gravitacionales para el análisis del comercio exterior.Google Scholar
  16. Cárdenas M, García C (2004) El modelo gravitacional de comercio y el TLC entre colombia y Estados Unidos. Working Paper Series, Fedesarrollo 27:1–37Google Scholar
  17. Carrère C (2006) Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model. Eur Econ Rev 50(2):223–247. doi: 10.1016/j.euroecorev.2004.06.001 CrossRefGoogle Scholar
  18. Cipollina M, Salvatici L (2010) The trade impact of the European Union agricultural preferences. J Econ Policy Reform 13(1):87–106CrossRefGoogle Scholar
  19. Correia J. (2008). The determinants of colombian exports: an empirical analysis using the gravity model. Desarrollo y Sociedad 165-206Google Scholar
  20. Deardorff AV (1995) Determinants of bilateral trade: does gravity work in a neoclassical world? NBER (Working Paper 5377) pp 1–28Google Scholar
  21. DeRosa DA (2008) Gravity model analysis. Maghreb regional and global integration: a dream to be fulfilledGoogle Scholar
  22. Dixit AK, Stiglitz JE (1977) Monopolistic competition and optimum product diversity. Am Econ Rev 67:297–308Google Scholar
  23. Eaton J, Kortum S (2002) Technology, geography, and trade. Econometrica 70(5):1741–1779CrossRefGoogle Scholar
  24. EEAS (European External Action Service) (2010) European Union external action, Republic of Colombia. Retrieved 28 Jul 2010, from
  25. Egger P (2002) An econometric view on the estimation of gravity models and the calculation of trade potentials. World Econ 25(2):297–312CrossRefGoogle Scholar
  26. Feenstra RC, Markusen JR, Rose AK (2001) Using the gravity equation to differentiate among alternative theories of trade. Can J Econ Rev Can Economique 34(2):430–447CrossRefGoogle Scholar
  27. Glick R, Rose AK (2002) Does a currency union affect trade? The time-series evidence. Eur Econ Rev 46(6):1125–1151CrossRefGoogle Scholar
  28. Hausman JA, Taylor WE (1981) Panel data and unobservable individual effects. Econometrica 49:1377–1398CrossRefGoogle Scholar
  29. Helpman E, Krugman P (1985) Market structure and foreign trade. Increasing returns, imperfect competition, and the international economy. MIT Press, Cambridge, MAGoogle Scholar
  30. Johnston J, DiNardo J (1997) Econometric methods, 4th edn. McGraw-Hill/IrwinGoogle Scholar
  31. Koetsenruijter A (2006) Evolución de las relaciones comerciales colombia-unión europeaGoogle Scholar
  32. Leamer EE, Levinsohn J (1995) International trade theory: the evidence. In: Grossman G, Rogoff K (eds) The handbook of international economics. North-Holland, ElsevierGoogle Scholar
  33. Lederman D, Özden Ç (2007) Geopolitical interests and preferential access to U.S. markets. Econ Polit 19(2):235–258CrossRefGoogle Scholar
  34. Linneman H (1966) An econometric study of international trade flows. North-Holland, AmsterdamGoogle Scholar
  35. Martínez-Zarzoso I, Cantavella M, Fernández JI (2003) Estimación y aplicaciones de una ecuación de gravedad para el comercio atlántico de la unión europea. Información Comercial Española, ICE: Revista De Economía 806:23–32Google Scholar
  36. Martínez-Zarzoso I, Suárez-Burguet C (2005) Transport costs and trade:Empirical evidence for latin american imports from the european union. Int Trade Econ Dev 14(3):353–371CrossRefGoogle Scholar
  37. Nilsson L (2002) Is the roadmap from Lome to Cotonou correct? Appl Econ 34(11):439–452CrossRefGoogle Scholar
  38. Orozco AM (2002) Colombia, la unión europea y el SGP andino. Unpublished manuscript.from…/Colombia_UEySGPAndino.ppt
  39. Plümper T, Troeger V (2007) Efficient estimation of time-invariant and rarely changing variables in finite sample panel analyses with unit fixed effects. Polit Anal 15(2):124–139CrossRefGoogle Scholar
  40. Rose AK (2004) Do we really know that the WTO increases trade? Am Econ Rev 94(1):98–114CrossRefGoogle Scholar
  41. Evenett SJ, Keller W (2002) On theories explaining the success of the gravity equation. J Polit Econ 110(2):281–316CrossRefGoogle Scholar
  42. Soloaga I, Alan Wintersb L (2001) Regionalism in the nineties: what effect on trade? N Am J Econ Finance 12(1):1–29. doi: 10.1016/S1062-9408(01)00042-0 CrossRefGoogle Scholar
  43. Press S (2009) Stata longitudinal-data panel-data reference manual, release 11. Stata Press, College Station, Texas, USAGoogle Scholar
  44. Subramanian A, Wei S (2007) The WTO promotes trade, strongly but unevenly. J Int Econ 72(1):151–175. doi: 10.1016/j.jinteco.2006.07.007 CrossRefGoogle Scholar
  45. Tinbergen J (1962) Shaping the world economy: suggestions for an international economic policy. Twentieth Century Fund, New YorkGoogle Scholar
  46. World Bank (2002) Trade frictions and welfare in the gravity model. Retrieved 25 July 2010, from

Copyright information

© Physica-Verlag HD 2011

Authors and Affiliations

  1. 1.School of Business AdministrationEAFIT UniversityMedellínColombia

Personalised recommendations