 A structural analysis on Gravity of Trade regarding the possibility to remove distance from the modelERSA conference papers from European Regional Science Association Abstract: The Gravity Model is the workhorse for empirical studies in International Economies and it is commonly used in explaining the trade flow between countries. Recently, several studies have showed the importance of taking into account the spatial effect. The standard procedure until now was to account the transport cost using geographical distance as a proxy, and the spatial effect trough a weighted matrix constructed on inverse distance. Two issues follow from this standard procedure: the first regards the biasness of the distance if used as a proxy of the transport costs, the second is related to the collinearity emerging if we use distance twice. So, several attempt were made in the recent literature having the scope of remove the distance. We propose a theoretically consistent procedure based on Anderson, Van Wincoop derivation model, and some ad-hoc tests, relating to this attempt. The empirical results based on a 22-years panel of OECD countries are conforting, and they allow us to estimate the model without the distance, if properly replaced by a set of fixed effects. Keywords: Spatial Econometrics; Gravity Model; International trade; trade cost; multilateral resistance terms; fixed effects. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa13p520 Access Statistics for this paper More papers in ERSA conference papers from European Regional Science Association Welthandelsplatz 1, 1020 Vienna, Austria. |
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