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The IUP Journal of International Relations

Testing the Gravity Model for Kazakhstan's Exports to Trade Partners from 2001-2019

Article Details

Pub. Date	: July, 2023
Product Name	: The IUP Journal of International Relations
Product Type	: Article
Product Code	: IJIR010623
Author Name	: aleb Bryan, Kishore G Kulkarni and Amitabh S Dutta
Availability	: YES
Subject/Domain	: Arts & Humanities
Download Format	: PDF Format
No. of Pages	: 12

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Abstract

The Gravity Model of International Trade has proven to be an especially resilient economic model when tested against empirical data. This paper adds to the mounting empirical evidence supporting the Gravity Model by testing it for Kazakhstan's trade data with 10 different trading partners during the years 2019, 2015, 2010, 2005, and 2001. While the Gravity Model has been applied to many different countries, few studies examine the Kazakhstan case. We attempt to balance the trading partners selected between both countries that are near Kazakhstan-such as Russia, China, Mongolia, Uzbekistan, and Tajikistan-and countries around the globe that are comparatively far away from Kazakhstan-such as the United States, United Kingdom, Germany, Brazil, and Nigeria. The model posits that if two trading partners have larger GDPs, then they should have a larger trade volume. Moreover, if two trading partners are separated by great distance, then they should have a smaller trade volume. For simplicity, this paper tests Kazakhstan's exports in place of total trade volume. Overall, our findings suggest that the Gravity Model fits well in explaining Kazakhstan's trade behavior.

Introduction

The Gravity Model of International Trade has proven to be an exceptionally valid model when tested against empirical data. Other models consider supply side conditions, like the Heckscher-Ohlin Theorem which posits that countries should specialize in either capital-intensive production or labor-intensive production depending upon which factor of production they already have in abundance. Other models may also examine demand conditions, such as Linder's hypothesis which argues that countries often trade because of domestic demand for foreign goods and not just because of supply conditions. Uniquely, the Gravity Model does not consider either demand or supply conditions as the primary driver of trade, but simply expresses two basic relationships: (1) GDP sizes of trading partners are directly related to trade volume; and (2) distance that separates trading partners is inversely related to trade volume. Rather intuitively, the model suggests that countries will have a larger overall trade volume if they both have large GDPs and that countries will have a smaller overall trade volume if they are separated by great distance, regardless of supply or demand conditions in both countries.