The Gravity Equation: To Pool or Not to Pool-A Critical Assessment

Ghaddab Kamel
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Ghaddab Kamel: High Institute of Management, Sousse University

Journal of Economic Integration, 2026, vol. 41, issue 2, 381-428

Abstract: This paper develops an empirical framework to analyze the relationship between geographical factors and economic integration. Critiquing traditional gravity models of bilateral trade for their empirical rather than theoretical foundations, we propose a new quantitative approach to enhance the accuracy of integration measurements. Addressing key theoretical and econometric challenges, we advocate for the use of hierarchical linear mixed models, which capture nuanced variations in international trade flows often overlooked by traditional methods. This approach integrates spatial and economic factors more effectively, offering a robust alternative for empirical trade analysis. Our findings contribute to the methodology of trade studies, providing improved tools for understanding the dynamics of economic integration.

Keywords: Trade Openness; Gravity Model; Geography; Hierarchical Linear Models; Panel Data (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:022613

DOI: 10.11130/jei.2025016

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