The Gravity Model in International Trade: Advances and Applications

Description

How do borders affect trade? Are cultural and institutional differences important for trade? Is environmental policy relevant to trade? How does one's income or wage relate to the fact that trade partners are nearby or far away? These are just some of the important questions that can be answered using the gravity model of international trade. This model predicts and explains bilateral trade flows in terms of the economic size and distance between trading partners (e.g. states, regions, countries, trading blocs). In recent years, there has been a surge of interest in this model and it is now one of the most widely applied tools in applied international economics. This book traces the history of the gravity model and takes stock of recent methodological and theoretical advances, including new approximations for multilateral trade resistance, insightful analyses of the measurement of economic distance and analyses of foreign direct investment.

Steven Brakman is Professor of Economics at the University of Groningen, The Netherlands. His most recent book is the The New Introduction to Geographical Economics (Cambridge University Press, 2009), co-authored with Harry Garretsen and Charles Van Marrewijk. Peter van Bergeijk is Professor of International Economics and Macroeconomics at the Institute of Social Studies, The Hague. He is also Deputy Director of CERES, the coordinating body for development economics research in the Netherlands. His most recent book is A Wealth of Creations (2007), co-edited with Gerrit Faber and Norine Maniran.

'Theoretical foundations and empirical estimation strategy of gravity models have significantly advanced over the last years. By tracing the history of this evolution and offering a rich sample of applications, this book will prove to be a very useful reference to both those new to the field and those in search of an up-to-date treatment of theoretical and methodological issues related to gravity models.' Roberta Piermartini, World Trade Organisation