Gravity

• January 30, 2018

  Reproduction: Sheperd, B. (2016). The gravity model of international trade: A user guide.

  The updated paper and dataset can be downloaded from UNESCAP.

  Load libraries and read data

  library("AER")
  library("dplyr")
  library("foreign")
  library("ggplot2")
  library("lmtest")
  library("multiwayvcov")
  library("sampleSelection")
  
  services <- read.dta("servicesdataset_2016.dta")

  Correlations

  Table 1

  services <- services %>%
    mutate(ln_trade = log(trade),
           ln_distance = log(dist),
           ln_gdp_exp = log(gdp_exp),
           ln_gdp_imp = log(gdp_imp))
  
  cor_data <- services %>%
    filter(sector == "SER") %>%
    select(ln_trade, ln_gdp_exp, ln_gdp_imp, ln_distance) %>%
    na.omit() %>%
    filter(ln_trade > -Inf)
  
  round(cor(cor_data), 4)

  ##             ln_trade ln_gdp_exp ln_gdp_imp ln_distance
  ## ln_trade      1.0000     0.3643     0.3731     -0.2648
  ## ln_gdp_exp    0.3643     1.0000    -0.3103      0.0518
  ## ln_gdp_imp    0.3731    -0.3103     1.0000      0.0431
  ## ln_distance  -0.2648     0.0518     0.0431      1.0000

  Graphics

  Prepare data