What is it about?
The use of trade in Value Added (TIVA) data in gravity models may yield fresh insights into international commerce. The purpose of this article is to investigate whether reliance on "traditional" foreign trade statistics and TiVA data leads in variations in gravity model calculations for a wide sample of OECD and non-OECD nations. According to our findings, these disparities are minimal, which may be explained by the fact that nations' preferences for trade in terms of gross and value added may be identical.
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Why is it important?
Global value chains have proliferated in the global economy over the last few decades, rendering "traditional" foreign trade data less and less meaningful for examining individual nations' roles in international commerce. New datasets, such as the OECD's TiVA, are now available to distinguish between gross trade and domestic value added exchanged abroad in order to gain a better understanding of a country's position in international commerce.
Perspectives
Analysing other categories of nations, such as the so-called headquarter and manufacturing economies separately, might result in significant discrepancies between structural gravity models when utilising the two datasets.
Professor Imre Ferto
Centre for Economic and Regional Studies, Hungarian Academy of Sciences: Budapest
Read the Original
This page is a summary of: Gravity models with TiVA data: do they bring new results?, Applied Economics Letters, November 2022, Taylor & Francis,
DOI: 10.1080/13504851.2022.2145010.
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