On the role of domestic trade flows for estimating the gravity model of trade
Abstract
The gravity equation is the workhorse model of trade. Despite solid theoretical foundations and clear gains from theory‐consistent policy analysis, there are still gaps between gravity theory and empirics. This paper focuses on domestic trade flows, and I argue that there are significant benefits from adhering to theory by estimating gravity equations with domestic (in addition to international) trade flows. I review the related literature and synthesize 15 arguments for using domestic trade flows in gravity estimations. The analysis reveals the need for further theory contributions and new data developments, and points to opportunities for more policy applications.
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Yotov (2022) describes 11 benefits of using domestic trade flows in gravity regressions.
“Yotov (2022) describes 11 benefits of using domestic trade flows in gravity regressions.”
From Estimating the effects of trade agreements: Lessons from 60 years of methods and data (2024) · cites this paper as Yotov (2022)
The presence of domestic trade flows is important for theory-consistent structural gravity estimations of the effects of various policies.
“As demonstrated by Yotov et al. (2016) and summarized in 15 reasons by Yotov (2022), the presence of domestic trade flows is important for theory-consistent structural gravity estimations of the effects of various policies.”
From Quantifying the partial and general equilibrium effects of sanctions on Russia (2024) · cites this paper as Yotov (2022)
Cites
Export Versus FDI with Heterogeneous Firms
Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004) · American Economic Review · doi:10.1257/000282804322970814 · Cited by 4,090 · see citing works
Anderson, J. E., & van Wincoop, E. (2004) · Journal of Economic Literature · doi:10.1257/0022051042177649 · Cited by 2,524 · see citing works
Estimating Trade Flows: Trading Partners and Trading Volumes <sup>*</sup>
Helpman, E., Melitz, M., & Rubinstein, Y. (2008) · Quarterly Journal of Economics · doi:10.1162/qjec.2008.123.2.441 · Cited by 2,436 · see citing works
An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model
Yotov, Y. V., Piermartini, R., Monteiro, J.-A., & Larch, M. (2016) · doi:10.30875/abc0167e-en · Cited by 959 · see citing works
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Estimating the effects of trade agreements: Lessons from 60 years of methods and data
Larch, M., & Yotov, Y. V. (2024) · The World Economy · doi:10.1111/twec.13569 · Cited by 56 · see citing works
Self-citationQuantifying the partial and general equilibrium effects of sanctions on Russia
Flach, L., Heiland, I., Larch, M., Steininger, M., & Teti, F. A. (2024) · Review of International Economics · doi:10.1111/roie.12707 · Cited by 20 · see citing works
- Authors
- Yotov, Y. V.
- Affiliations
- Ifo Institute for Economic Research (DE)
- Corresponding author
- Yotov, Yoto V.
- ORCID
- Yotov, Yoto V.
- Venue
- Contemporary Economic Policy
- Publisher
- Wiley
- Published
- 2022-02
- Volume
- 40
- Issue
- 3
- Pages
- 526-540
- ISSN
- 1074-3529 (ISSN-L)
- 1465-7287
- OpenAlex
- W4212979054
- Cited by
- 187
- References
- 4
- Citations by year
- 2026: 30 · 2025: 61 · 2024: 49 · 2023: 33 · 2022: 11 · 2021: 2 · 2020: 1
- FWCI
- 53.24
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Contemporary Economic Policy (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Technological Innovation
- Social Sciences › Business, Management and Accounting › Strategy and Management › Global Trade and Competitiveness
- Keywords
- gravity model of trade, international trade, trade theory, trade policy analysis, trade data
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