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Gravity Models in International Trade: A Specification Curve Analysis

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  • Erik Merkus

    (National Board of Trade Sweden
    Stockholm School of Economics)

Abstract

The gravity model is widely used to estimate the effect of a reduction in trade costs on international trade flows. Researchers face many analytical decisions in their choice for an empirical strategy. This paper uses a specification curve analysis method to study the effect of these choices on estimated trade effects. I find that despite significant heterogeneity in estimated trade effects, the distribution in the empirical international trade literature overlaps fairly well with the estimates in this specification curve analysis. However, individual decisions have a significant impact on average estimated trade effects.

Suggested Citation

  • Erik Merkus, 2024. "Gravity Models in International Trade: A Specification Curve Analysis," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-10, December.
    • Handle: RePEc:kap:jincot:v:24:y:2024:i:1:d:10.1007_s10842-024-00426-5
    DOI: 10.1007/s10842-024-00426-5
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    References listed on IDEAS

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    1. Natalie Chen & Dennis Novy, 2022. "Gravity and Heterogeneous Trade Cost Elasticities," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1349-1377.
    2. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
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    6. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    7. Piermartini, Roberta & Yotov, Yoto V., 2016. "Estimating trade policy effects with structural gravity," WTO Staff Working Papers ERSD-2016-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    8. Uri Simonsohn & Joseph P. Simmons & Leif D. Nelson, 2020. "Publisher Correction: Specification curve analysis," Nature Human Behaviour, Nature, vol. 4(11), pages 1215-1215, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    International trade; Gravity model; Specification curve; Trade effect; Free trade agreements;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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