A gravity model analysis of meat trade policies

Abstract

The conventional gravity modcl is revised for a single commodity and applicd to meat markets to determine factors affccting trade flows of meat. This study dcrnonstratcs that the gravit y model for a single agricultural commodity can be paramcterized more effectively by using tirnc series and cross-section data rather than cross-section data alonc. This study rcvcals that tradc policies and subsidics uscd by cxporting and importing coun tries, Iivestock production capacity in countrics, and distances play an important role in detcrrnining trade Ilows of meat.Long-terni agreements achievc the highcst performance toward cnhancing international meat trade. lmport quotas and the hoof-and-rnouth disease on becf greatly impair meat trade.

Determinants of Albanian Agricultural Export: The Gravity Model Approach

“…Hence, Albanian migrants might lower information and transaction costs through knowledge of homecountry markets, language, business contracts etc. Therefore, empirical studies suggest that larger migrant stocks are associated with higher trade flows (see Gould, 1994 Effects of exchange rate are frequently incorporated in gravity models dealing with agricultural trade (see Koo et al, 1994;Frankel and Wei, 1998;Hatab et al, 2010). In our case, annual exchange rate is determined by the Albania's currency units (ALL/Albanian Lek) per one unit of the importing country currency.…”

“…In this paper, we utilize conventional income variables explaining bilateral trade flows. Exporter's GDP (Albania) explains country's productive potential, while GDP of importing partner reflects absorbing potential, respectively purchasing power (see Koo et al, 1994). Theoretical framework of the gravity model predicts positive relationship to trade for both variables.…”

The Design of the Romanian Wine Imports and Exports Using the Gravity Model Approach

“…-Panel data are strongly recommended mainly for highly volatile products, such as wine (Koo et al, 1994); -The estimations obtained using the panel data are more robust comparing to the ones using OLS (Koutsoyiannis, 1977); -The efficiency of the estimations obtained using panel data is better due to the reductions of the colinearity issues (Hsiao, 1986). The equations used in the model are: lnEt = a0t+ a1t · ln GDPPCt+ a2t · ln Dt+ a3t · ln Exratest+ a4t · ln UnitprEt+ a5t · ln Prodt+ a6t · EU+ a7t · Schengen+ a8t · Rel_dummy+ et and lnIt = a0t+ a1t · ln GDPPCt+ a2t · ln Dt+ a3t · ln Exratest+ a4t · ln UnitprEt+ a5t · ln Prodt+ a6t · EU+ a7t · Schengen+ a8t · Rel_dummy+ et where -Et is either EXTt=real export or EXPORTt= the export corrected using the Tobit estimator -It same as above but for import -Dt is either Dist (distance) or Distcom (isolation) -et captures the error -t is the year, from 2004 to 2015 -GDP was used as a measure for the size of an economy by many authors : Brada & Mendez (1985), McCallum (1995), Bergstrand (1989), because for the exporter countries GDP represents the production potential, while for the importer countries represents the purchasing power.…”

“…The equations used in the model are: lnEt = a0t+ a1t · ln GDPPCt+ a2t · ln Dt+ a3t · ln Exratest+ a4t · ln UnitprEt+ a5t · ln Prodt+ a6t · EU+ a7t · Schengen+ a8t · Rel_dummy+ et and lnIt = a0t+ a1t · ln GDPPCt+ a2t · ln Dt+ a3t · ln Exratest+ a4t · ln UnitprEt+ a5t · ln Prodt+ a6t · EU+ a7t · Schengen+ a8t · Rel_dummy+ et where -Et is either EXTt=real export or EXPORTt= the export corrected using the Tobit estimator -It same as above but for import -Dt is either Dist (distance) or Distcom (isolation) -et captures the error -t is the year, from 2004 to 2015 -GDP was used as a measure for the size of an economy by many authors : Brada & Mendez (1985), McCallum (1995), Bergstrand (1989), because for the exporter countries GDP represents the production potential, while for the importer countries represents the purchasing power. GDP has a positive influence on trade flows, because a greater production potential leads to many products available for export and a greater purchase power leads to many opportunities for imports (Koo et al, 1994). Another measure for economic size namely GDP per capita was used in 1999 by Cheng and by Wall.…”

“…While distance usually has a negative effect, the effect of isolation could be either positive or negative. -Unit price for export or for import were used as independent variables by Koo, Karemera and Taylor (1994), therefore the unit price for export should have a positive effect on trade flows and a negative one for imports. UnitprE was the name of the variable used for export and Unitpr the one for import.…”