DOI: 10.14704/nq.2017.15.2.1023

The Role of Distance in the Gravity Model: From the View of Newton, International Economics and Quantum Mechanics

Gelengul Kocaslan

Abstract


The gravity model widely used in international economics in order to explain bilateral trade flows between countries has its roots in physics and the common variable suggested in both of the equations used in physics and economics is “distance”. Although several variables expected to have significant effect on trade are added to the analysis in the field of international economics lately; distance is always considered as the first issue because of its correlation with transportation costs. Similarly, from it was first suggested by Newton in the equation of the universal gravity law to Einstein and to the recent finding in the field of quantum mechanics much attention has been paid to distance in physics research too. The aim of this paper is to examine the role of distance in the gravity models considering economic and physics perspectives with an eye to Newton’s equation, Einstein’s relativity and quantum mechanics.

Keywords


Gravity model, international economics, international trade, quantum mechanics.

Full Text:

Full Text PDF

References


Anderson JE. A theoretical foundation for the gravity equation. American Economic Review 1979; 69 (1): 106-116.

Anderson JE and van Wincoop E. Gravity with gravitas: a solution to the border. The American Economic Review 2003; 93(1): 170-192.

Anderson J E. The Gravity Model. https://www.nottingham.ac.uk/gep/documents/lectures/nottm-lectures-in-int-economics/2011/jandersonbackgroundreading.pdf Accessed date:25.04.2016

Behar A and Venables A J. Transport costs and international trade. University of Oxford Department of Economics Discussion Paper Series 2010.

Bernard A, Eaton J, Jensen J B, Kortum S. Plants and productivity in international trade. American Economic Review 2003; 93 (4): 1268–1290.

Bergstrand JH. The generalized gravity equation, monopolistic competition, and the factor-proportions theory in international trade. The Review of Economics and Statistics 1989; 71(1): 143-53.

Bergstrand JH. The gravity equation in international trade: some microeconomic foundations and empirical evidence. Review of Economics and Statistics 1985; 67 (3): 474–81.

Bergstrand JH and Egger P. Gravity Equations and Economic Frictions in the World Economy. In Palgrave Handbook of International Trade; Bernhofen D, Falvey R, Greenaway D and Kreickemeier U (Eds.), Palgrave Macmillan Publishing, 2011: 1-49.

Bernard AB, Jensen JB, Redding SJ, Schott PK. Firms in international trade. Journal of Economic Perspectives 2007; 21 (3): 105–130.

Brun J-F, Carre`re C, Guillaumont P, de Melo J. Has distance died? Evidence from a panel gravity model.’’ World Bank Economic Review 2005; 19 (1): 99–120.

Caltech. The Final Contradiction. http://www.theory.caltech.edu/people/jhs/strings/str115.html Accessed date:25.04.2016.

Chaney T. Distorted Gravity: The intensive and extensive margins of international trade. American Economic Review 2008; 98 (4):1707–21.

Chaney T. The Gravity Equation in International Trade: An Explanation, Chicago, 2011.

Choi M-D. The principle of locality made simpler but harder, https://cms.math.ca/Reunions/hiver15/abs/pdf/oa-mc.pdf Accessed date:25.04.2016.

Coyle JJ, Bardi EJ, Langley CJ. Management of Business Logistics: A Supply Chain Perspective, South-Western College Publishing, Ohio, 2003.

Crozet M and Koenig P. Structural gravity equations with intensive and extensive margins. CEPII Working Paper. No 2008, 30.

Deardorff AV. Testing Trade Theories and Predicting Trade Flows. In Handbook of International Economics. Vol. 1. Jones R W and Kenen P (Eds.), Elsevier, 1984: 467–517.

Deardorff AV. Determinants of Bilateral Trade:Does Gravity Work in a Neoclassical World?. In The Regionalization of the World Economy; Frankel J A (Ed.), University of Chicago Press, Chicago, 1988: 7–32.

Eaton J and S. Kortum. Technology, geography, and trade. Econometrica 2002; 70(5):

–1779.

Feenstra RC, Markusen JR, Rose AK. Using the gravity equation to differentiate among alternative theories of trade. Canadian Journal of Economics 2001; 34 (2): 430–47.

Feenstra R C. Advanced International Trade: Theory and Evidence. Princeton University Press, New Jersey, 2004.

Harrigan J. 2005. Airplanes and Comparative Advantage. National Bureau of Economic Research Working Paper 11688, 2005.

Haveman J and Hummels D. Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization. Canadian Journal of Economics 2004; 37 (1): 199–218.

Head K. Gravity for Beginners. University of British Columbia, 2003.

Head K and Mayer T. Gravity Equations: Workhorse, Toolkit, and Cookbook. CEPII Working Paper No 2013, 27.

Helpman E, Melitz M, Rubinstein Y. Estimating trade flows: trading partners and trading volumes. Quarterly Journal of Economics 2008; 123(2): 441-487.

Helpman E. Imperfect competition and international trade: evidence from fourteen industrial countries. Journal of the Japanese and International Economies 1987; 1 (1): 62–81.

Henderson JV, Shalizi Z, Venables AJ. Geography and development. Journal of Economic Geography 2001; 1(1): 81-105.

Hensen B, Bernien H, Dreau A E, Reiserer A, Kalb N, Blok M S, Ruitenberg J, Vermeulen R F L, Schouten R N, Abellan C, Amaya W, Pruneri V, Mitchell M W, Markham M, Twitchen D J, Elkouss D, Wehner S, Taminiau T H, Hanson R. Loophole-free Bell inequality violation using electron spins separated by 1.3 kilometres. Nature 2015 (526):682–686.

Herrera E G and Baleix J M. Are estimation techniques neutral to estimate gravity equations? An application to the impact of EMU on third countries’ exports. http://www.etsg.org/ETSG2009/papers/gomez.pdf Accessed date:25.04.2016.

Herzenberg C L. Holographic position uncertainty and the quantum-classical transition. https://arxiv.org/ftp/arxiv/papers/1004/1004.2640.pdf Accessed date:25.04.2016.

Hummels D. Transportation costs and international trade in the second era of globalization. Journal of Economic Perspectives 2007; 21(3):131–154.

Krugman, P. Scale economies, product differentiation, and the pattern of trade. American Economic Review 1980; 70(5):950–959.

Leamer E and Stern R. Quantitative international economics. Journal of International Economics 1971; 1(3):359-361.

Linnemann H. An Econometric Study of International Trade Flows Amsterdam. North-Holland Publishing Co, 1966.

McCallum J. National borders matter: Canada-U.S. regional trade patterns. The American Economic Review 1995; 85(3):615-623.

McFarland H. Transportation Costs for US Imports from Developed and Developing

Countries. Journal of Development Studies 1985; 21(4): 562-571.

Martínez-Zarzoso I, Voicu A M, Vidovic M. EU-Accession Effects On Sectoral Trade: A Helpman-MelitzRubinstein Approach With Panel Data. CESifo Conference on Estimation of GRAVİTY Models of Bilateral Trade, 30-31 May, Germany, 2014.

Mayer T, Ottaviano G. The Happy Few: The Internationalisation of European firms. Bruegel Blueprint Series, 2007.

Melitz M J. The impact of trade on intra-industry reallocations and aggregate

industry productivity. Econometrica 2003; 71(6):1695–1725.

Melitz M, Ottaviano G. Market size, trade, and productivity. Review of Economic Studies 2008; 75 (1): 295–316.

Merali Z. Toughest test yet for quantum ‘spookiness’. Nature 2015; (525):14-15.

Ost L. NIST Team Proves 'Spooky Action at a Distance' is Really Real. https://www.nist.gov/news-events/news/2015/11/nist-team-proves-spooky-action-distance-really-real Accessed date:25.04.2016.

Powell C S. Will Quantum Mechanics Swallow Relativity? The contest between gravity and quantum physics takes a new turn. Nautilus 2015; 29.

Ravenstein E G. The laws of migration. Journal of the Royal Statistical Society 1889; 52(2): 241-305.

Redding S and Venables T. Economic geography and international inequality. Journal of International Economics 2004; 62 (1): 53-82.

Reinert K A. Gravity models. http://press.princeton.edu/chapters/reinert/19article_reinert_gravity.pdf Accessed date:25.04.2016

Rose A K. Do we really know that the WTO increases trade?. American Economic Review 2004; 94(1):98-114.

Rose A K and van Wincoop E. National money as a barrier to international trade: the real case for currency union. The American Economic Review 2001; 91(2):386-390.

Sahoo S. String Theory: Big Problem For Small Size. European Journal of Physics 2009; 30 (4): 901-909.

Sen A. String theory and Einstein’s Dream. Current Science, Special Section: The Legacy of Albert Einstein 2005; 89(12): 2045-2053.

Squartini T and Garlaschelli D. Jan Tinbergen’s Legacy for Economic Networks: From the Gravity Model to Quantum Statistics. In Econophysics of Agent-Based models; Abergel F et al. (Eds.), Springer International Publishing, Switzerland, 2014:161-186.

Starck S C. The Theoretical Foundation of Gravity Modeling: What are the developments that have brought gravity modeling into mainstream economics? Unpublished Master Thesis, Denmark, 2012.

WTO. World Trade Report, Trade in a Globalizing World, 2008 https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report08_e.pdf Accessed date:25.04.2016.

The Basis for the Gravity Model: From Intuition to Theory. http://www.unescap.org/sites/default/files/4%20%202.%20The%20Basis%20for%20the%20Gravity%20Model-%20From%20Intuition%20to%20Theory_0.pdf Accessed date:25.04.2016.

Transportation Cost and International Trade.

http://www.aabri.com/LV11Manuscripts/LV11081.pdf Accessed date:25.04.2016.


Supporting Agencies

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.



| NeuroScience + QuantumPhysics> NeuroQuantology :: Copyright 2001-2017