Analyzing the bilateral trade of agricultural goods from south to north countries using the gravity model of international trade: The case of the Philippines

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ID: 285832
2019
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Abstract
The Gravity Model of International Trade started by replicating the intuition coming from theoretical physics. The approximation of bilateral trade flows is the paramount purpose of utilizing Newton’s Universal Law of Gravitation. This helped pave the way for the formulation of theoretically-grounded empirical research for international trade. The main idea underpins the rationale of countries, in closer proximity, should trade more. Now, with more variables and data becoming more available, the use of the original gravity variables is deemed obsolete. Database for Tariff and Non-Tariff Measures (NTMs) have developed over time. However, inclusion of these new variables in the model requires a more estimation. Up to this date, Pseudo-Poisson Maximum Likelihood by Santos-Silva and Tenreyro (2006) is the most robust estimation to handle the zero-trade flow issue. The study aims to investigate the Philippine agricultural trading patterns between south-to-north and south-to-south export activities. Studying the agricultural sector is important primarily because it is the most vulnerable sector due to high poverty incidence and low labor productivity. International Trade is one option to improve the sector. The Philippines' agricultural sector has benefited from entering trade agreements with northern countries. Despite this wonderful outcome, results show top agricultural exports are vulnerable to south-to-south economic integration if Philippines were to enter trade agreements with its southern neighbors.
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Authors Salvanera, Arjan Paulo S.
Journal Malay Journal
Year 2019
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