engleski

When Linder meets gravity model: the case of USA, Germany and Japan

This paper brings into conjunction the gravity model of international trade with the Linder hypothesis. Both trade theories are “new trade” theories of international trade established in the 60s and 70s of the last century after the Leontief testing of Heckscher-Ohlin theory. The gravity model of international trade is similar to Isaac Newton's gravity model while Linder hypothesis is a demand based theory. These two concepts are therefore mutually opposite. In order to confront two important theories of international trade, bilateral trade data for imports and manufactured imports specifically for three large World countries (the United States, Germany and Japan) in the period from 2000 to 2016 are collected. Panel regression models are constructed for both the gravity model and the Linder variable representing the Linder effect. The Linder variable is specified as an absolute difference between partner countries GDP’s per capita. The results of the analysis have shown that trade data for all three observed countries comport with the gravity model of trade while the Linder effect could not be confirmed.

Linder hypothesis, gravity model of international trade, panel data

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