The analysis of export and impediments using extended gravity model (the case of Georgia)
Loading...
Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
UNWE
Abstract
The goal of the present paper is to examine the drivers and impediments of Georgia’s exports to 33 Free Trade and Preferential partner countries during the 2000-2015 period and make trade policy recommendations. The analysis relies on the extended gravity model of trade in log-log form. The present analysis of the export determinants of Georgia, which is a small economy with high degree of trade openness, enriches the available international practice of application and testing the gravity model. The research results can be applied in comparative research studies.
The results show that Georgia’s exports to Free Trade and Preferential partner countries is strongly influenced by partners’ size (GDP and population) and geographic distance. Cultural and institutional distances as well as colonial ties are less significant determinants. There are variables other than the ones included in the model and they have stronger effects on Georgia’s exports so they need to be explored further. The study provides the grounds to draw important conclusions on the directions of Georgia’s economic integration and raises issues for further research.
Description
1. Athukorala, P.C. and Waglé, S., 2013. Export Performance in Transition: The Case of Georgia (No. 2013-02).
2. Anderson E., Marcouiller D. 2002. Insecurity and the Pattern of Trade: An Empirical Investigation. The Review of Economics and Statistics, 84:2, 342-352.
3. Beckerman W. 1956. Distance and the Pattern of Intra-European Trade. The Review of Economics and Statistics. Vol. 38, No. 1, pp. 31-40 http://discovery.ucl. ac.uk/17858/1/17858.pdf.
4. Beugelsdijk S., Maseland R., van Hoorn A. 2015. Are Hofstede’s Culture Dimensions
Stable Over Time? A Generational Cohort Analysis, retrieved from: https://www.
researchgate.net/publication/280915365_A r e _ S c o r e s _ o n _ H o f s t e d e % 2 7 s _Dimensions_of_National_Culture_Stable_over_Time_A_Cohort_Analysis.
5. Berthelon M., Freund C. 2008. On The Conservation of Distance in International Trade, Journal of International Economics, Elsevier; World Bank Policy Research Working Paper 3293.
6. De Groot, H.L.F., Linders, G.J.M., Rietveld, P., Subramanian, U.: The Institutional Determinants of Bilateral Trade Patterns. Kyklos 57, 103–123, 2004.
7. Disdier, A. C., Head, K. 2008. The Puzzling Persistence of the Distance Effect on Bilateral Trade. Review of Economics and Statistics, 90( 1), 37-48.
8. Dunning, J. H. 1993. The Globalisation of Business. London-NY: Routledge.
9. Estrin S., Baghdasaryan D., Meyer K. E. 2009. The Impact of Institutional and Human
Resource Distance on International Entry Strategies. Journal of Management Studies. 46:7 November.
10. Fuenfzig M. 2016. A Quantitative Assessment of the Proposed China-Georgia Free Trade Agreement retreived from https://mpra.ub.uni-muenchen.de/78040/1/MPRA_paper_78040.pdf.
11. Frankel, J. A. 1997. Regional Trading Blocs in the World Economic System. Washington,
DC: Institute for International Economics.
12. Frankel J., Stein E., Wei Sh. (1995). Trading Blocs and the Americas: The Natural,
the Unnatural, and the Super-natural. Journal of Development Economics. Vol. 47, 61-95.
13. Gaur, A. S., & Lu, J. W. 2007. Ownership Strategies and Survival of Foreign
Subsidiaries: Impacts of Institutional Distance and Experience. Journal of Management,
33(1), 84–110.
14. Grossman, G. M. 1998. Comment. In J. A. Frankel (Ed.), The Regionalization of the World Economy (pp. 28-32). Chicago: University of Chicago Press.
15. Guiso, L., Sapienza, P., Zingales, L. 2009. Cultural Biases in Economic Exchange.
Quarterly Journal of Economics, 124(3), 1095-1 131.
16. Gylfason, T., Martínez-Zarzoso, I., Wijkman, P. M. 2015. Free Trade Agreements, Institutions and the Exports of Eastern Partnership Countries. Gender, Work And Organization, 53: 1214–1229. doi: 10.1111/jcms.12275.
17. Håkanson L., Dow D. 2012. Markets and Networks in International Trade: On the Role of Distances in Globalization. Management International Review, Vol. 52, No. 6 (2012), pp. 761-789.
18. Hofstede, G. 1980. Culture’s Consequences: International Differences in Work-related Values, Beverly Hills, CA: Sage Publications.
19. Hofstede, G. 2001. Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations, Thousand Oaks, London, New Delhi: Sage Publications.
20. Jamagidze L., Papachashvili N., Shaburishvili Sh., Sikharulidze D. 2011. The Socio-cultural Environment of International Business in Georgia, Universali Publishing, Tbilisi. Also, available at http://www.ascn.ch/dms/downloads/Research/Research-ProjectsCall Georgia-2010/Research-Reports/Research-Report-Ja magid ze /Research%20Repo%20Jamagidze.pdf.
21. Kostova, T. 1998. Success of the Transnational Transfer of Organizational Practices within Multinational Companies, CBI – Working Paper 98-4.
22. Kostova, T. 1999. Transnational Transfer of Strategic Organizational Practices: A Contextual Perspective, Academy of Management Review 24(2): 308-324.
23. Kostova, T. and S. Zaheer 1999. Organizational Legitimacy under Conditions of Complexity: The Case of the Multinational Enterprise, Academy of Management Review, 24(1): 64-81.
24. Kogut, B., Singh, H. 1988. The Effect of National Culture on the Choice of Entry Mode. Journal of International Business Studies, 1 9(3), 4 1 1-432.
25. Krugman, P. 1995. Increasing Returns, Imperfect Competition and the Positive Theory of International Trade. In G. M. Grossman & K. Rogoff (Eds.), Handbook of international economics, 111 (pp. 1243- 1277). Amsterdam: Elsevier.
26. Linders, G. J., HL Slangen, A., De Groot, H. L., Beugelsdijk, S. 2005. Cultural And
Institutional Determinants of Bilateral Trade Flows. Tinbergen Institute Discussion Paper.
Linnemann, H. 1966. An Econometric Study of International Trade Flows. Amsterdam: North-Holland.
27. Neal M. 1998. The Culture Factor: Crossnational Management and the Foreign Venture, Houndmills. UK. Macmillan Press.
28. North, D. 1990, Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University. Press.
29. Schwartz Shalom H. (2008). Cultural Value Orientations: Nature & Implications of National Differences. Moscow State University – Higher School of Economics Press.
30. Shalom H. Schwartz. 2006. A Theory of Cultural Value Orientations: Explication and
Applications. Comparative Sociology, Volume 5, issue 2-3.
31. Singh, D., Gaur, A. S. 2012. Institutional Distance and International Strategy. In
Merchant, H. & Verbeke, A. (Eds.), Handbook of International Strategic Management, Elgar
Publishing.
32. Smarzynska, B. 2001. Does Relative Location Matter for Bilateral Trade Flows? An Extension of the Gravity Model. Journal of Economic Integration, 16(3), 379-398.
33. Srivastava, R. K., Green, R. T. 1986. Determinants of Bilateral Trade Flows. The Journal of Business., 59(4), 623. Research Collection Lee Kong Chian School Of Business.
34. Subramanian, A., Wei, Sh. 2007, The WTO Promotes Trade, Strongly but Unevenly, Journal of International Economics, 72, Issue 1, p. 151-175.
35. Tadesse, B., White, R. 2010. Cultural Distance as a Determinant of Bilateral Trade Flows: Do Immigrants Counter the Effects of Cultural Distance? Applied Economics Letters 17(2): 147-152.
36. Tinbergen, Jan. 1962. Shaping the World Economy: Suggestions for an International Economic Policy. New York: Twentieth Century Fund.
37. Siew, I. Ng., Lee J. A., Soutar, G. N. (2006). Are Hofstede’s and Schwartz’s Value Frameworks Congruent? International Marketing Review, Vol. 24 No. 2, 2007 pp. 164-180
38. Ullman E. L. 1956. The Role of Transportation and the Bases for Interaction. In Man’s Role in Changing the Face of the Earth, edited by W. L. Thomas, pp. 862-80. Chicago: University of Chicago Press.
39. Wooldridge M. J. 2013, Introductory Econometrics: A Modern Approach, Fifth Edition, 2013, 2009 South-Western, Cengage Learning
40. World Values Survey (WVS), available at:
www.worldvaluessurvey.org
41. Xu, D., Shenkar, O. 2002. Institutional Distance and the Multinational Enterprise.
Academy of Management Review, 27, 608–18.
42. Yeats, M. H. 1969. A Note Concerning the Development of a Geographical Model of International Trade. Geographic Analysis, 1:399-404.
43. Yu J., Zietlow D. S. 1995. The Determinants of Bilateral Trade Among Asia- Pacific Countries, ASEAN Economic Bulletin, Vol. 11, No. 3 (MARCH 1995), pp. 298-305.
44. Zhou N. B., Guillen, H. M. 2010. An Institutional Approach to Cross-national Distance, Journal of International Business Studies, 41: 1460-1480.
45. Zhou, M. 2010. Multidimensional and Gravity in Global Trade, 1950-2000, Social Forces, Vol. 88, No. 4 (June 2010), pp. 1619-1643.: Oxford University Press.
Keywords
export, gravity model, pooled OLS, random effects, fixed-effects, institutional distance, cultural distance, preferential trade regime, free trade regime, Georgia
Citation
Economic Alternatives, 2018, Issue 1, pp. 69-85