The implications of re-exports for gravity equation estimation, NAFTA and Brexit

M.B.M. Lankhuizen, Mark Thissen

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper illustrates the importance of taking into account re-exports. We show that not taking into account re-exports causes estimates from the gravity model to be biased. We also consider the implications of re-exports for two current policy events. We show that the US actually ran a net trade surplus in NAFTA. Second, we argue there may be additional costs for the UK economy from Brexit that are not addressed in earlier studies. This paper derives bilateral trade flows corrected for re-exports for a large number of countries at a detailed product level, using the World Input-Output Database (WIOD). Through a constrained non-linear optimisation procedure, complete origin-destination matrices of re-exports are determined. Trade is subsequently restored to its most likely origin and destination.
Original languageEnglish
JournalSpatial Economic Analysis
DOIs
Publication statusAccepted/In press - 6 May 2019

Fingerprint

NAFTA
Gravity
gravity
Gravity Model
Constrained Optimization
Nonlinear Optimization
Biased
trade flow
Likely
Output
Costs
Estimate
Trade
Gravity equation
matrix
economy
cause
event
costs
cost

Keywords

  • bilateral trade
  • trade policy
  • re-exports
  • gravity equations
  • Brexit
  • NAFTA
  • constrained non-linear optimisation
  • WIOD

Cite this

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The implications of re-exports for gravity equation estimation, NAFTA and Brexit. / Lankhuizen, M.B.M.; Thissen, Mark.

In: Spatial Economic Analysis, 06.05.2019.

Research output: Contribution to JournalArticleAcademicpeer-review

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