Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade
This paper revisits the ubiquitous bi-proportional gravity model and investigates the reasons why different theoretical frameworks may lead to the same empirical formula. The generic gravity equation possesses scale invariance symmetries that const...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/01/17206376/integrating-gravity-role-scale-invariance-gravity-models-spatial-interactions-trade http://hdl.handle.net/10986/13161 |
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okr-10986-131612021-04-23T14:03:07Z Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade Arvis, Jean-François ACTUAL VALUE AIR AIR TRANSPORT ARBITRAGE BILATERAL TRADE BUDGET CONSTRAINTS CONNECTIVITY CONSTANT ELASTICITY OF SUBSTITUTION COST OF TRANSPORT COUNTRY OF ORIGIN DESTINATION DEVELOPMENT POLICY DOMESTIC PRODUCTION ECONOMIC POLICY ECONOMIC SIZE ELASTICITY ELASTICITY OF SUBSTITUTION EUROPEAN UNION EXPORTERS GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELING GRAVITY MODELS IDENTITY IMPACT OF TRADE IMPEDANCE IMPORTING COUNTRY INTEGER INTERNATIONAL BANK INTERNATIONAL TRADE MARKET ACCESS MAXIMUM LIKELIHOOD ESTIMATION MOBILITY MULTINATIONAL CORPORATION MULTIPLIERS OPTIMIZATION POLICY RESEARCH PRODUCT DIFFERENTIATION REGIONALIZATION TRADE COSTS TRADE FLOWS TRANSPORT NETWORK TRANSPORTATION TRANSPORTATION COST TRANSPORTATION COSTS TRANSPORTATION ECONOMICS UNION UTILITY FUNCTION VALUE OF TRADE VEHICLES WORLD TRADE This paper revisits the ubiquitous bi-proportional gravity model and investigates the reasons why different theoretical frameworks may lead to the same empirical formula. The generic gravity equation possesses scale invariance symmetries that constrain possible theoretical explanations based on optimal allocation principles, such as neoclassical or probabilistic frameworks. These constraints imply that a representative consumer's utilities must be separable, and that an entropy model is the only consistent maximum likelihood allocation of a matrix of flows between origin and destination. The paper explores the feasibility of wider classes of non-scale invariant gravity equations, where gravity is no longer bi-proportional by including nonlinear interactions between trade costs and fundamental country factors such as economic size. It shows that such extensions are feasible but that they do not result in a significant improvement in the explanatory power of the empirical analysis. 2013-04-11T19:42:18Z 2013-04-11T19:42:18Z 2013-01 http://documents.worldbank.org/curated/en/2013/01/17206376/integrating-gravity-role-scale-invariance-gravity-models-spatial-interactions-trade http://hdl.handle.net/10986/13161 English en_US Policy Research Working Paper;No. 6347 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ACTUAL VALUE AIR AIR TRANSPORT ARBITRAGE BILATERAL TRADE BUDGET CONSTRAINTS CONNECTIVITY CONSTANT ELASTICITY OF SUBSTITUTION COST OF TRANSPORT COUNTRY OF ORIGIN DESTINATION DEVELOPMENT POLICY DOMESTIC PRODUCTION ECONOMIC POLICY ECONOMIC SIZE ELASTICITY ELASTICITY OF SUBSTITUTION EUROPEAN UNION EXPORTERS GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELING GRAVITY MODELS IDENTITY IMPACT OF TRADE IMPEDANCE IMPORTING COUNTRY INTEGER INTERNATIONAL BANK INTERNATIONAL TRADE MARKET ACCESS MAXIMUM LIKELIHOOD ESTIMATION MOBILITY MULTINATIONAL CORPORATION MULTIPLIERS OPTIMIZATION POLICY RESEARCH PRODUCT DIFFERENTIATION REGIONALIZATION TRADE COSTS TRADE FLOWS TRANSPORT NETWORK TRANSPORTATION TRANSPORTATION COST TRANSPORTATION COSTS TRANSPORTATION ECONOMICS UNION UTILITY FUNCTION VALUE OF TRADE VEHICLES WORLD TRADE |
| spellingShingle |
ACTUAL VALUE AIR AIR TRANSPORT ARBITRAGE BILATERAL TRADE BUDGET CONSTRAINTS CONNECTIVITY CONSTANT ELASTICITY OF SUBSTITUTION COST OF TRANSPORT COUNTRY OF ORIGIN DESTINATION DEVELOPMENT POLICY DOMESTIC PRODUCTION ECONOMIC POLICY ECONOMIC SIZE ELASTICITY ELASTICITY OF SUBSTITUTION EUROPEAN UNION EXPORTERS GRAVITY EQUATION GRAVITY MODEL GRAVITY MODELING GRAVITY MODELS IDENTITY IMPACT OF TRADE IMPEDANCE IMPORTING COUNTRY INTEGER INTERNATIONAL BANK INTERNATIONAL TRADE MARKET ACCESS MAXIMUM LIKELIHOOD ESTIMATION MOBILITY MULTINATIONAL CORPORATION MULTIPLIERS OPTIMIZATION POLICY RESEARCH PRODUCT DIFFERENTIATION REGIONALIZATION TRADE COSTS TRADE FLOWS TRANSPORT NETWORK TRANSPORTATION TRANSPORTATION COST TRANSPORTATION COSTS TRANSPORTATION ECONOMICS UNION UTILITY FUNCTION VALUE OF TRADE VEHICLES WORLD TRADE Arvis, Jean-François Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| relation |
Policy Research Working Paper;No. 6347 |
| description |
This paper revisits the ubiquitous
bi-proportional gravity model and investigates the reasons
why different theoretical frameworks may lead to the same
empirical formula. The generic gravity equation possesses
scale invariance symmetries that constrain possible
theoretical explanations based on optimal allocation
principles, such as neoclassical or probabilistic
frameworks. These constraints imply that a representative
consumer's utilities must be separable, and that an
entropy model is the only consistent maximum likelihood
allocation of a matrix of flows between origin and
destination. The paper explores the feasibility of wider
classes of non-scale invariant gravity equations, where
gravity is no longer bi-proportional by including nonlinear
interactions between trade costs and fundamental country
factors such as economic size. It shows that such extensions
are feasible but that they do not result in a significant
improvement in the explanatory power of the empirical analysis. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Arvis, Jean-François |
| author_facet |
Arvis, Jean-François |
| author_sort |
Arvis, Jean-François |
| title |
Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| title_short |
Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| title_full |
Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| title_fullStr |
Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| title_full_unstemmed |
Integrating Gravity: The Role of Scale Invariance in Gravity Models of Spatial Interactions and Trade |
| title_sort |
integrating gravity: the role of scale invariance in gravity models of spatial interactions and trade |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/01/17206376/integrating-gravity-role-scale-invariance-gravity-models-spatial-interactions-trade http://hdl.handle.net/10986/13161 |
| _version_ |
1764422840627494912 |