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Gravity model of trade flows between European Union countries in the era of globalization

Author

Listed:
  • Natalia Drzewoszewska

    (Nicolaus Copernicus University, Poland)

  • Michal Bernard Pietrzak

    (Nicolaus Copernicus University, Poland)

  • Justyna Wilk

    (Wroclaw University of Economics, Poland)

  • Stanislaw Matusik

    (Wroclaw University of Economics, Poland)

Abstract

The objective of the paper is to present the impact of globalization conditions on trade flows between states. These determinants were considered as alternative factors for the physical distance between countries in the gravity model performed by Tinbergen (1962). In the traditional gravity model a value of trade exchange between any of two countries is directly proportional to the product of their GNP and inversely proportional to the distance between them. In the current global economy geographical distance between regions is not identified as a factor of preventing a trade exchange; therefore the distance measure in gravity model may be interpreted as an economic dissimilarity of cooperating countries. In the paper the international trade flows between EU members in the period of 1999-2010 were examined. Panel gravity models presented in the literature prove that the globalization factors, apart from a geographical distance, perform a significant role for increasing international trade. The impact of improving transport infrastructure was confirmed in the study.

Suggested Citation

  • Natalia Drzewoszewska & Michal Bernard Pietrzak & Justyna Wilk & Stanislaw Matusik, 2013. "Gravity model of trade flows between European Union countries in the era of globalization," Working Papers 27/2013, Institute of Economic Research, revised Jul 2013.
    • Handle: RePEc:pes:wpaper:2013:no27
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    Citations

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    Cited by:

    1. Natalia Drzewoszewska, 2014. "Searching for the Appropriate Measure of Multilateral Trade-Resistance Terms in the Gravity Model of Bilateral Trade Flows," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 14, pages 29-49.

    More about this item

    Keywords

    international trade; European Union; globalization; gravity model of trade flows; panel model;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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