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Structural gravity and trade agreements: does the measurement of domestic trade matter?

Author

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  • Rodolfo G. Campos

    (Banco de España)

  • Jacopo Timini

    (Banco de España)

  • Elena Vidal

    (Banco de España)

Abstract

Economic theory suggests including domestic trade flows when estimating structural gravity models. The inclusion of domestic trade flows helps to identify parameters that cannot be estimated with international trade flows alone. The complication is that domestic trade flows can be measured empirically in different ways. Does it matter which one is used? We compare the three most common approaches to measuring domestic trade and show that they lead to very similar estimates of the parameters that are usually estimated within a structural gravity framework.

Suggested Citation

  • Rodolfo G. Campos & Jacopo Timini & Elena Vidal, 2021. "Structural gravity and trade agreements: does the measurement of domestic trade matter?," Working Papers 2117, Banco de España.
    • Handle: RePEc:bde:wpaper:2117
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    Cited by:

    1. Rodolfo G. Campos & Benedikt Heid & Jacopo Timini, 2024. "The economic consequences of geopolitical fragmentation: Evidence from the Cold War," Papers 2404.03508, arXiv.org.
    2. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
    3. Rodolfo G. Campos & Iliana Reggio & Jacopo Timini, 2022. "Thick borders in Franco’s Spain: the costs of a closed economy," Working Papers 2209, Banco de España.
    4. Rodolfo G. Campos & Iliana Reggio & Jacopo Timini, 2023. "Autarky in Franco's Spain: The costs of a closed economy," Economic History Review, Economic History Society, vol. 76(4), pages 1259-1280, November.
    5. Jacopo Timini & Francesca Viani, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, CEPII research center, issue 169, pages 291-308.
    6. Maria Cipollina & Luca Salvatici, 2022. "The Dark Matter of Bilateral Preferential Margins: An Assessment of the Effect of US Tariffs," Sustainability, MDPI, vol. 14(8), pages 1-16, April.
    7. Amendolagine, Vito & Bruno, Randolph Luca & Cipollina, Maria & De Pascale, Gianluigi, 2023. "Minimum Global Tax: Winners and Losers in the Race for Mergers and Acquisitions," IZA Discussion Papers 16144, Institute of Labor Economics (IZA).
    8. Sertić Martina Basarac & Vučković Valentina & Andabaka Ana, 2024. "Examining the Effects of Trade Liberalisation Using a Gravity Model Approach," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-12, January.
    9. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    10. 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.
    11. Paudel, Nawaraj S. & Lahiri, Sajal, 2024. "The effects of state-level foreign manufacturing imports on domestic inter-state and intra-state sales in the U.S.A," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 297-305.
    12. Yoto V. Yotov, 2022. "On the role of domestic trade flows for estimating the gravity model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 526-540, July.
    13. Peter H. Egger & Mario Larch & Yoto V. Yotov, 2022. "Gravity Estimations with Interval Data: Revisiting the Impact of Free Trade Agreements," Economica, London School of Economics and Political Science, vol. 89(353), pages 44-61, January.
    14. Campos, Rodolfo G. & Estefania-Flores, Julia & Furceri, Davide & Timini, Jacopo, 2023. "Geopolitical fragmentation and trade," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1289-1315.
    15. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    16. ANDO Mitsuyo & URATA Shujiro & YAMANOUCHI Kenta, 2022. "Effects of Product-Specific Rules of Origin on Trade in Free Trade Agreements: Evidence from the cases of Japan," Discussion papers 22035, Research Institute of Economy, Trade and Industry (RIETI).
    17. Baier, Scott & Standaert, Samuel, 2024. "Gravity, globalization and time-varying heterogeneity," European Economic Review, Elsevier, vol. 163(C).
    18. Meiling Li & Lijie Zhang & Zhuangzhuang Zhang, 2023. "Impact of Digital Economy on Inter-Regional Trade: An Empirical Analysis in China," Sustainability, MDPI, vol. 15(15), pages 1-22, August.
    19. Rodolfo G. Campos & Jacopo Timini, 2022. "Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR," Applied Economics, Taylor & Francis Journals, vol. 54(49), pages 5655-5669, October.
    20. Paniagua, Jordi & Peiró-Palomino, Jesús & Santana-Gallego, María, 2022. "Does happiness drive tourism decisions?," Economic Modelling, Elsevier, vol. 111(C).
    21. Raul Caruso & Maria Cipollina, 2023. "The Effect of Economic Sanctions on World Trade of Mineral Commodities. A Gravity Model Approach from 2009 to 2020," DISCE - Quaderni del Dipartimento di Politica Economica dipe0034, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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    More about this item

    Keywords

    international trade; structural gravity model; domestic trade; trade agreements;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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