Premium
The Geometry of the Distance Coefficient in Gravity Equations in International Trade
Author(s) -
Rauch Ferdinand
Publication year - 2016
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12252
Subject(s) - gravity model of trade , analogy , intuition , pairwise comparison , gravity equation , economics , mathematics , bilateral trade , physics , international trade , geography , statistics , linguistics , philosophy , archaeology , epistemology , china
Gravity equations in trade imply that trade flows are proportional to the size of a country and inversely proportional to distance. This paper develops the analogy of gravity in physics with gravity in trade and provides geometric intuition for a large class of mathematical processes in two‐dimensional space for which these relationships would be expected. This model implies that distances between countries in empirical gravity estimations should be measured as weighted harmonic means of pairwise distances of local economic activity.