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Session 2: Introduction to the basic gravity model - ESCAP

Session 2: Introduction to the basic gravity model - ESCAP

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proportional to the square of distance between them. 2 ij i j ij D M M F G Intuitive gravity for trade distance, adjacency, .., " policy factors". tradecostsbetween two countries economic mass ( GDP), contstant, exports (or trade) from i to j , | | t Y C X t Y Y X C ij ij i j ij Export (or trade) between two countries depends on their economic ...

  Proportional

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