Empirical application of trade gravity model

In 1960s, the gravity model was introduced into the study of measuring bilateral trade flow, and it was continuously expanded and improved. More and more literatures use gravity model to make empirical research on international trade. Madedes (1997, 1998), Chen & Wall (1999), Bruce & Pegger (1999), Eg-ger(2000) and others have perfected the econometric norms of the gravity model. Bell strand (1985), Hupman (1987), Wei (1996), Soloyaga & Winters (1999), Lu Mao & venables (1999). In the extended trade gravity model, two variables are often added: one is to add virtual variables. For example, * * * has the same language, * * has the same border, * * * has the same colonial history, * * * has the same religion and so on. The early expansion of the trade gravity model is mainly based on this category. The other is to add the variable of institutional quality index. Such as whether it belongs to preferential trade agreements or regional economic integration organizations, the quality of government governance, and the guarantee of contract execution. Since 10 this century, with the vigorous development of institutional economics, institutional quality factors have been widely introduced into the trade gravity model, which has become the focus of Chinese and foreign researchers, especially foreign researchers. The research on institutional factors is no longer limited to the rough model of whether they belong to the same preferential trade arrangement or regional economic integration organization, but begins to measure the influence of institutional factors on bilateral trade with specific quantitative indicators.

1, measurement of the impact of institutional arrangements of regional trade agreements. According to Viner's research (1950), regional trade agreements promote trade among member countries, resulting in trade creation effect and trade diversion effect. Gravity models are increasingly used to measure the impact of regional trade agreements on bilateral trade. Soloyaga & Winters (1999) analyzed the influence of economic regionalization in 1990s, and Piaru &; Kume(2000) studied the bilateral trade among 44 countries participating in preferential trade arrangements (such as NAFTA, EU, ASEAN, etc.). ), while Blavy(200 1) examines the decisive factors and development potential of international trade in Maryland. LucianCermal(200 1) uses gravity model and panel data to study the great influence of regional trade agreements established between developing countries on trade among member countries.

Domestic scholars' research on the institutional arrangements of regional trade agreements is mostly concentrated in APEC, ASEAN, East Asia, Northeast Asia and other regions. Hou Ming, (2005), Huang (2007), Lin Ling, Yan Wang (2004), Cao Hongcheng (2007), Zhang Yu, Tang Zhifang (2006), (2007), (2008) and others verified the import and export flows of APEC to China and its trading partners. Wang (2007) studied the influence of two preferential trade arrangements: APEC and ASEAN. The results show that the simple gravity model can better reveal the factors that affect the trade flow between China and its major trading partners. The institutional arrangement of APEC has a great influence on China's foreign trade, while the ASEAN and China Free Trade Area have just started, but they have not played the expected role. In contrast, Chen Hanlin, Tu Yan (2007), Dan, Yang Jie (2006), Hou Tieshan, Jiang Shuzhu (2006), Zhang (2003) and Wu Dan (2008) all made empirical analysis and research on the influence of China-ASEAN Free Trade Area on China's foreign trade. An Ye, Li Xiumin and Zhang Lixue (2005) investigated the main factors that determined the bilateral trade situation of Northeast Asian countries in 2003, and estimated the trade volume among Northeast Asian countries to explore the trade potential among Northeast Asian countries.

The author also discusses the influence of Shanghai Cooperation Organization, European Union, Mainland China and Hongkong on China's foreign trade. Qin Li (2008) discussed the influence of the Shanghai Cooperation Organization on the trade flow between Xinjiang and Central Asian countries, and Wu Zejun (2008) introduced a new dummy variable EUE into the gravity model to reflect the influence of EU's eastward expansion on China-EU agricultural trade. The conclusion is that EU's eastward expansion will have a negative impact on China-EU agricultural trade. Sheng Qing (2007) introduced CEPA (Closer Economic Partnership Arrangement between Mainland and Hong Kong) into the econometric model of traditional trade gravity equation, and studied the promotion of CEPA to the trade between six central provinces in China and Hong Kong. The conclusion is that the effect is not obvious, and some suggestions are put forward on how to better play the CEPA mechanism and promote the trade volume between the central region and Hong Kong.

Many scholars use gravity model to analyze the factors affecting bilateral trade flow from the industry level. Shi Chaoxing and Gu (2005) used the trade flow data of 1998-2002 between China and its main vegetable export trading partners to make a regression calculation on the vegetable export gravity model. The results show that the economic aggregate of vegetable importing countries, the gross domestic product of China vegetable industry and the arrangement of APEC regional trade system all have significant positive effects on the flow and direction of China vegetable export trade, and the transportation cost represented by distance is the main factor that hinders vegetable export. Zhuang,,, (2007) verified the influencing factors of Guangdong agricultural products exported to ASEAN, and calculated and analyzed the flow of Guangdong agricultural products exported to ASEAN. The research shows that Guangdong's agricultural export flow to ASEAN is mainly influenced by ASEAN countries' GDP, per capita GDP, distance and regional trade system arrangement, and Guangdong and most ASEAN countries show "insufficient trade". Marin and Li Wenqiang (2008) established the gravity model equation of Chinese mainland's aquatic products export trade, and made an empirical study on the trade flow and direction of Chinese mainland's aquatic products export. The research shows that the total fishery production in Chinese mainland, the economic aggregates of countries and regions importing aquatic products and the arrangement of APEC regional trade system all have a significant positive impact on Chinese mainland's aquatic products export trade, and the transportation cost represented by distance is the most important factor that hinders the export of aquatic products. Zhao Yulin and Lin Guanghua (2008) made an in-depth analysis of the bilateral agricultural trade flow and trade potential between China and ASEAN 10 countries. The results show that the bilateral trade flow of agricultural products between the two countries is mainly influenced by economic scale, national population, the linear distance between the two capitals and various trade system arrangements. Among them, economic scale and preferential trade arrangements are the most important factors.

2. Measure the influence of institutional quality factors. Anderson company. Mar-couiller(2002) introduced a series of economic institutional variables to reflect the impact of institutions on trade flows. The results show that the transaction cost is significantly related to the unsafe factors that hinder international trade. If a country's transparency and justice index rises by 10%, its import demand will rise by 5%. The institutional variables introduced by Grut et al. (2004) include political stability, government efficiency and supervision. The results show that the similarity of the two countries' systems can increase the trade flow between the two countries by 12%- 18%. Depending on the import and export, controlling every standard deviation of quality can increase the trade flow between the two countries by 20%-24%, and a standard deviation of corruption can increase the trade volume by 17%-27%.

Pan Xiangdong et al. (2004) found that the legal system of formal constraints, the economic system factors of trading countries and the system affecting the operating expenses of enterprises all have a significant impact on China's trade with other countries. Pan Xiangdong et al. (2005) further test results show that the institutional arrangements of importing countries have a significant impact on the trade of high-tech products between the two countries. When formulating China's export strategy of high-tech products, we should pay more attention to the institutional arrangement of trading countries' performance in the short term and the improvement of institutional environment in the long term.

Wu Dan (2008b) selected 65,438+00 economies in East Asia. In addition to the GDP of importing and exporting countries and the geographical distance between the two countries, it also introduces a series of explanatory variables reflecting the quality of a country's system, such as trade policy index, government financial burden index, government intervention index, monetary policy index, capital flow and foreign investment index, banking and financial index, wage and price index, property right index, supervision index and black market activity index, in order to explore and analyze the institutional factors in East Asia. The results show that the system has a significant impact on the trade between East Asian economies. Among them, the institutional factors that have an important influence on the export trade of East Asian economies are: banking and finance, government intervention, black market activities, capital flow and foreign investment, and monetary policy. The institutional factors that have an important influence on the import trade of East Asian economies are: banking and finance, government intervention, property rights and government burden. The influence of government intervention on the import trade of East Asian economies is greater than that on the export trade.

3. Forecast the trade potential between some countries. Christie(2002) used the cross-sectional data of 1996- 1999 to predict the trade potential of southeast Europe, Rahman(2003) used the gravity model to predict the trade potential of Bangladesh through some economic factors, and AmitaBatra(2004) used the cross-sectional data of 2000 to analyze the world trade flow and predict the trade potential of India. Sohn, C-h(2005) used the trade gravity model to investigate many factors affecting the bilateral trade flow of South Korea, and concluded that the trade potential of South Korea with Japan and China has not been fully developed.

4. Test the trade patterns of some countries. Evenett & amp. Eller (2002) analyzed the foreign trade flows of 58 major trading countries in 1985 by using the analysis method of cross-sectional data. The results show that the trade types of countries with large economic scale and large trade volume (generally developed countries) conform to Krugman's intra-industry trade theory of increasing returns to scale, while the foreign trade of countries with small economic scale and small trade volume (generally developing countries) obviously conforms to the traditional H-O factor endowment theory. Sohn, Chan-Hyun(2005) analyzed the characteristics of trade structure between South Korea and its main trading partners by using the extended trade gravity model, and concluded that the trade flow of South Korea mainly conforms to the characteristics of inter-industry trade in the H-O model, and there is great room for the development of trade between South Korea and China. Normalization of North-South trade and North Korea's entry into APEC will greatly promote bilateral trade.