Gravity Model of International Trade: Origin and Modern Approaches

Abstract

The article examines the historical origins of the formation of gravity modeling and its use in the study of the intensity of international trade. It is emphasized that the driving forces of international exchange and the search for optimal policy ways of its implementation are based on classical theories of international trade. They are based on a liberal approach to deny the need for state restrictions on the free flow of goods between countries in order to regulate the volume, structure and directions of the country's foreign trade. The contribution of outstanding economists to the development of the theoretical and methodological foundations of the construction of gravity models of international exchange is considered. The features of their application for empirical research in the field of international trade are characterized. Factors affecting international trade flows are identified. An analysis of theoretical and methodological approaches to the formation of an effective gravity model of foreign trade was carried out based on the search for factors that influence it and contribute to the intensification of international trade flows between partner countries. The specificity of the involvement of new additional variables in gravity models is shown. It is emphasized that the bifurcation processes taking place in the modern globalized world form new conditions of international exchange. Attention is focused on the fact that such a situation necessitates the further development of theoretical and methodological bases for forecasting the volume of international trade based on the identification of cause-and-effect dependencies and spatio-temporal relationships. The conducted review of the history of gravity modeling, its use in studies of the international trade intensity, the contribution of prominent economists to the deepening of the theoretical and methodological foundations of the of international exchange gravity models construction showed quite wide opportunities for their further improvement based on taking into account the factors that influence the volume of bilateral trade. It was investigated that the problems are: 1) Selection of variables of the gravity model from the side of export and import for its adaptation to modern conditions of the world trade. The bifurcation processes taking place in the modern globalized world form new conditions of international exchange. 2) Gravitational models are empirical models built on liberal and neoliberal theories of international economic relations. In the conditions of globalization, a high level of interaction and interdependence of countries, the intensification of international trade flows, the movement of resources from a weaker trading partner to rich and powerful states means the flow of resources from underdeveloped and poor countries to stronger and richer ones. Gravitational models of international trade are a reflection and improvement of this process.