In the section Articles
Title of the article Interregional Trade in Russia: Gravity Approach
Pages 98-127
Author 1 Konstantin Nikolaevich Salnikov
Postgraduate Student
Far Eastern Federal University
10 Ajax Bay, Russky Island, Vladivostok, 690922, Russian Federation
This email address is being protected from spambots. You need JavaScript enabled to view it.
ORCID: 0009-0008-3516-8934
Author 2 Alexander Yurievich Filatov
Candidate of Sciences (Mathematics), Head of the Research Laboratory of Socio-Economic Process Modeling
Far Eastern Federal University
10 Ajax Bay, Russky Island, Vladivostok, 690922, Russian Federation
This email address is being protected from spambots. You need JavaScript enabled to view it.
ORCID: 0000-0002-0380-5598
Abstract The paper analyzes interregional trade in Russia using gravity models. The model estimates the trade elasticity with respect to the size of exporting and importing regions and the distance between them. In addition, the impact on trade of additional factors, such as the common border of trading regions, the presence or absence of railroads, land or sea borders with other countries, is studied. Special attention is given to the issue of measuring distances between regions. The influence of the method of calculating the distance matrix (from the simplest orthodromic to the proposed weighted matrix of the shortest road and rail distances) on the coefficients of the models is studied. The all-Russian estimates of trade elasticities by the size of the exporting and importing region, equal to 1.15 and 1.05, showed high accuracy and robustness to the set of factors included in the model, the observation period, and the distance matrix. Both values were greater than one, which is significantly higher than typical estimates for international trade. This suggests that large and wealthy regions in Russia trade more, further increasing their welfare, while small and depressed regions are unable to escape the poverty trap, further increasing the current high level of regional heterogeneity. Distance is also very important in Russia (the elasticity of trade with respect to distance is –1.15, which is much higher than the world average, but still lower than the previous estimates for Siberia and the Russian Far East). This indicates insufficient transport infrastructure, higher costs of information search, transactions, contract execution, and other difficulties associated with long-distance trade. The absence of railroads in a region reduces its trade by about one-third, while neighboring regions increase the quantity of goods transported between them by about 75%. An external land or sea border facilitates domestic imports, some of which are re-exported abroad and some are consumed with the money earned from exports. At the same time, domestic exports from border regions, which cannot compete with external exports, are reduced. The method of calculating the distance matrix has a significant effect on the elasticity of trade with respect to distance, and to a limited extent on other coefficients of the model. In this case, it is recommended to use the weighted matrix proposed in this paper, which uses road distances for nearby regions and rail distances for distant regions
Code 332.1+339.1+330.4
JEL C31, F11, R10
DOI https://dx.doi.org/10.14530/se.2024.3.098-127
Keywords spatial economics, gravity models of trade, interregional trade, metrics, distance matrix, Russia
Download SE.2024.3.098-127.Salnikov.pdf
For citation Salnikov K.N., Filatov A.Yu. Interregional Trade in Russia: Gravity Approach. Prostranstvennaya Ekonomika = Spatial Economics, 2024, vol. 20, no. 3, pp. 98–127. https://dx.doi.org/10.14530/se.2024.3.098-127 (In Russian)
References 1. Abramov A.V., Gluschenko K.P. The Matrix of the Shortest Distances between Capital Cities of Russian Regions. Novosibirsk, 2000. Available at: https://gluschenko.nsu.ru/Research/Data/Distances.xls (accessed April 2024). (In Russian).
2. Alama-Sabater L., Marquez-Ramos L., Navarro-Azorin J., Suarez-Burguet C. A Two-Methodology Comparison Study of a Spatial Gravity Model in the Context of Interregional Trade Flows. Applied Economics, 2015, vol. 47, issue 14, pp. 1481–1493. https://doi.org/10.1080/00036846.2014.997929
3. Anderson J. A Theoretical Foundation for the Gravity Equation. The American Economic Review, 1979, vol. 69, no. 1, pp. 106–116.
4. Anderson J., van Wincoop E. Gravity with Gravitas: A Solution to the Border Puzzle. The American Economic Review, 2003, vol. 93, no. 1, pp. 170–192. https://doi.org/10.1257/000282803321455214
5. Anderson J., van Wincoop E. Trade Costs. Journal of Economic Literature, 2004, vol. 42, no. 3, pp. 691–751. https://doi.org/10.1257/0022051042177649
6. Anderson J., Vesselovsky M., Yotov Y. Gravity with Scale Effects. Journal of International Economics, 2016, vol. 100, pp. 174–193. https://doi.org/10.1016/j.jinteco.2016.03.003
7. Barro R., Tenreyro S. Economic Effects of Currency Unions. Economic Inquiry, 2007, vol. 45, issue 1, pp. 1–23. https://doi.org/10.1111/j.1465-7295.2006.00001.x
8. Cai M. A Calibrated Gravity Model of Interregional Trade. Spatial Economic Analysis, 2023, vol. 18, issue 1, pp. 89–107. https://doi.org/10.1080/17421772.2022.2081715
9. Deardorff A. Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World? The Regionalization of the World Economy. Chicago: University of Chicago Press, 1998, pp. 7–32.
10. Durlauf S., Quah D. The New Empirics of Economic Growth. Handbook of Macroeconomics, 1999, vol. 1, pp. 235–308. https://doi.org/10.1016/S1574-0048(99)01007-1
11. Eaton J., Kortum S. Technology, Geography, and Trade. Econometrica, 2002, vol. 70, issue 5, pp. 1741–1779. https://doi.org/10.1111/1468-0262.00352
12. Eaton J., Kortum S., Kramarz F. An Anatomy of International Trade: Evidence from French Firms. Econometrica, 2011, vol. 79, issue 5, pp. 1453–1498. https://doi.org/10.3982/ECTA8318
13. Egger P., Lassmann A. The Language Effect in International Trade: A Meta-Analysis. Economics Letters, 2012, vol. 116, issue 2, pp. 221–224. https://doi.org/10.1016/j.econlet.2012.02.018
14. Feenstra R., Markusen J., Rose A. Using the Gravity Equation to Differentiate Among Alternative Theories of Trade. Canadian Journal of Economics, 2001, vol. 34, issue 2, pp. 430–447. https://doi.org/10.1111/0008-4085.00082
15. Filatov A., Novikova A. The Gravity Model of Interregional Trade: Case of Eastern Siberia. Czech Journal of Social Sciences, Business and Economics, 2015, vol. 4, issue 3, pp. 39–46.
16. Frankel J., Romer D. Does Trade Cause Growth? The American Economic Review, 1999, vol. 89, no. 3, pp. 379–399. https://doi.org/10.1257/aer.89.3.379
17. Fujita M., Krugman P. The New Economic Geography: Past, Present and the Future. Papers in Regional Science, 2004, vol. 83, issue 1, pp. 139–164. https://doi.org/10.1007/s10110-003-0180-0
18. Fujita M., Krugman P., Venables A. The Spatial Economy: Cities, Regions, and International Trade. Cambridge: The MIT Press, 2001, 382 p.
19. Galimov D.I., Gnidchenko A.A., Salnikov V.A. Estimating the Distances between Russian Regions with an Account for Transport Infrastructure. Prostranstvennaya Ekonomika = Spatial Economics, 2024, vol. 20, no. 1, pp. 96–124. https://dx.doi.org/10.14530/se.2024.1.096-124 (In Russian).
20. Gomez-Herrera E. Comparing Alternative Methods to Estimate Gravity Models of Bilateral Trade. Empirical Economics, 2013, vol. 44, pp. 1087–1111. https://doi.org/10.1007/s00181-012-0576-2
21. Head K., Mayer T. Gravity Equations: Workhorse, Toolkit, and Cookbook. Handbook of International Economics, 2014, vol. 4, pp. 131–195. https://doi.org/10.1016/B978-0-444-54314-1.00003-3
22. Helpman E., Krugman P. Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy. Cambridge: The MIT Press, 1985, 284 p.
23. Helpman E., Melitz M., Rubinstein Y. Estimating Trade Flows: Trading Partners and Trading Volumes. The Quarterly Journal of Economics, 2008, vol. 123, issue 2, pp. 441–487. https://doi.org/10.1162/qjec.2008.123.2.441
24. Isard W. Interregional and Regional Input-Output Analysis: A Model of a Space-Economy. The Review of Economics and Statistics, 1951, vol. 33, no. 4, pp. 318–328. https://doi.org/10.2307/1926459
25. Izotov D.A. Assessment of Trade Intensity of the Russian Far East: Structural Approach. Zhurnal Novoy Ekonomicheskoy Assotsiatsii = Journal of the New Economic Association, 2021, no. 4, pp. 143–161. https://doi.org/10.31737/2221-2264-2021-52-4-6 (In Russian).
26. Izotov D.A. Economic Growth and the Trade of Russian Regions. Prostranstvennaya Ekonomika = Spatial Economics, 2018, vol. 14, no. 4, pp. 92–114. https://doi.org/10.14530/se.2018.4.092-114 (In Russian).
27. Kaukin A., Idrisov G. The Gravity Model of Russian Foreign Trade: Case of a Country with Large Area and Long Border. Ekonomicheskaya Politika = Economic Policy, 2013, no. 4, pp. 133–154. (In Russian).
28. Krugman P. Development, Geography, and Economic Theory. Cambridge: The MIT Press, 1997, 128.
29. Krugman P. Increasing Returns, Monopolistic Competition, and International Trade. Journal of International Economics, 1979, vol. 9, issue 4, pp. 469–479. https://doi.org/10.1016/0022-1996(79)90017-5
30. Krugman P. Scale Economies, Product Differentiation, and the Pattern of Trade. The American Economic Revie, 1980, vol. 70, issue 5, pp. 950–959.
31. Larch M., Yotov Y. Estimating the Effects of Trade Agreements: Lessons From 60 Years of Methods and Data. The World Economy, 2024, vol. 47, issue 5, pp. 1771–1799. https://doi.org/10.1111/twec.13569
32. Leontief W., Strout A. Multiregional Input-Output Analysis. Structural Interdependence and Economic Development. Edited by T. Barna. London: Palgrave Macmillan, 1963, pp. 119–150. https://doi.org/10.1007/978-1-349-81634-7_8
33. Limao N., Venables A. Infrastructure, Geographical Disadvantage, Transport Costs, and Trade. The World Bank Economic Review, 2001, vol. 15, issue 3, pp. 451–479. https://doi.org/10.1093/wber/15.3.451
34. Lipin A.S., Polyakova O.V. Assessment of Integration Processes in the Common Economic Space on the Example of Trade in Goods. Evraziyskaya Ekonomicheskaya Integratsiya [Eurasian Economic Integration], 2014, no. 1 (22), pp. 80–96. (In Russian).
35. McCallum J. National Borders Matter: Canada-US Regional Trade Patterns. The American Economic Review, 1995, vol. 85, issue 3, pp. 615–623.
36. Melitz M. The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica, 2003, vol. 71, issue 6, pp. 1695–1725. https://doi.org/10.1111/1468-0262.00467
37. Mishura A.V. The Estimation of Gravity Models of Russian Interregional Trade in Monopolistically Competitive Goods. Mir Ekonomiki i Upravleniya = World of Economics and Management, 2012, vol. 12, no. 4, pp. 52–58. (In Russian).
38. Ohlin B. Interregional and International Trade. Cambridge: Harvard University Press, 1968, 324 p.
39. Rose A. Do We Really Know That the WTO Increases Trade? The American Economic Review, 2004, vol. 94, no. 1, pp. 98–114. https://doi.org/10.1257/000282804322970724
40. Rose A. One Money, One Market: The Effect of Common Currencies on Trade. Economic Policy, 2000, vol. 15, issue 30, pp. 8–45. https://doi.org/10.1111/1468-0327.00056
41. Salnikov C.N., Filatov A.Yu. Russian Regional Matrix of Distances: Use in Economic Analysis. Izvestiya Dalnevostochnogo Federalnogo Universiteta. Ekonomika i Upravlenie = The Bulletin of the Far Eastern Federal University. Economics and Management, 2023, no. 3 (107), pp. 67–81. https://doi.org/10.24866/2311-2271/2023-3/67-81 (In Russian).
42. Samuelson P. International Trade and the Equalization of Factor Prices. The Economic Journal, 1948, vol. 58, issue 230, pp. 163–184. https://doi.org/10.2307/2225933
43. Shumilov A.V. Estimating Gravity Models of International Trade: A Survey of Methods. Ekonomicheskiy Zhurnal Vysshey Shkoly Ekonomiki = Higher School of Economics Economic Journal, 2017, vol. 21, no. 2, pp. 224–250. (In Russian).
44. Singh T. Does International Trade Cause Economic Growth? A Survey. The World Economy, 2010, vol. 33, issue 11, pp. 1517–1564. https://doi.org/10.1111/j.1467-9701.2010.01243.x
45. Tinbergen J. Shaping the World Economy. Suggestions for an International Economic Policy. New York: Twentieth Century Fund, 1962, 330 p.
46. Tomaev A.O., Kaukin A.S., Pavlov P.N. Russian Domestic Trade: Applying the Gravity Model for Rail Cargo Flows. Ekonomicheskaya Politika = Economic Policy, 2020, vol. 15, no. 5, pp. 60–89. https://doi.org/10.18288/1994-5124-2020-5-60-89 (In Russian).
47. Wolf H. Intranational Home Bias in Trade. Review of Economics and Statistics, 2000, vol. 82, issue 4, pp. 555–563. https://doi.org/10.1162/003465300559046
Financing This work was supported by the Ministry of Science and Higher Education of the Russian Federation, project No. FZNS-2023-0016 ‘Sustainable development of the region: effective economic mechanisms of market organization and entrepreneurial competencies of the population in conditions of uncertainty (the balance between security and risk)’
Submitted 17.06.2024
Approved after reviewing 26.07.2024
Accepted for publication 19.09.2024
Available online 04.10.2024

ISSN (Print) 1815-9834
ISSN (Online) 2587-5957

Minakir Pavel Aleksandrovich,

Journal’s Founder

 

Artem Isaev
Editor-in-Chief
Tel.: +7 (4212) 725-225
Fax: +7 (4212) 225-916
e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Samokhina Lyudmila
Executive Editor
Tel.: +7 (4212) 725-230
e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Editors
Tel.: +7 (4212) 725-230
e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

 
To Editorial Staff of “Spatial Economics”
Economic Research Institute FEB RAS
153 Tikhookeanskaya St., Khabarovsk, RUSSIA, 680042

 

 

Creative Commons License
Unless otherwise noted, content on this site is licensed under a Creative Commons Attribution 4.0 International License