A calibrated gravity model of interregional trade

Mattia Cai

Spatial Economic Analysis, 2023, vol. 18, issue 1, 89-107

Abstract: Lack of interregional trade data is often a major obstacle when doing economic analysis at the subnational level. This paper discusses a calibration procedure for estimating bilateral trade between the regions of a country. Our approach can be equivalently characterized as an application of the gravity-RAS or the doubly constrained gravity model method. Either way, a crucial element is represented by the distance elasticity parameter, which the user is expected to provide exogenously. We propose a way of estimating that parameter using standard econometric methods with readily available data and demonstrate our calibration procedure in a case study of Italy.

Date: 2023
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DOI: 10.1080/17421772.2022.2081715

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