Gravity models in international trade

Satya P. Das and Anirudh Shingal

Chapter 19 in Elgar Encyclopedia of International Trade, 2026, pp 89-94 from Edward Elgar Publishing

Abstract: This is a short review for intuitively understanding and learning the history and scope of the so-called gravity equation in international trade. Analogous to the Newtonian gravitational force between two bodies, it is an empirical equation relating the volume of bilateral trade to GDPs or some proxies of economy size of trading countries, factors affecting bilateral trade costs like physical distance, virtual distance (internet connectivity), tariff and non-tariff trade barriers, preferential trading arrangements, language and cultural differences, historical relationships, etc. and overall trade barriers facing the trading countries individually. The equation has evolved through its own generations in terms of theoretical foundations and estimation methods. It has a wide range of applications like estimating the sensitivity of trade flows—at aggregate and sectoral levels (e.g., manufacturing and services)—to various trade policy measures and bilateral factors, estimating welfare gains from trade and constructing instrumental variables for trade openness.

Keywords: Bilateral trade; Gravity; Trade costs; Multilateral resistance (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035327508.00024 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:23076_20

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Jack Sweeney ().