REGIONAL COOPERATION AND ECONOMIC INTEGRATION

SOME ASPECTS OF TRADE STATISTICS AND REPORTING
Stanislav Černoša 1
THE GRAVITY MODEL AS WORKHORSE: WHAT CAN WE
LEARN ALMOST FIFTY YEARS LATER
Abstract
This paper tests the gravity model, where the logarithm of the stock (or flow) of the
immigrants from origin to destination country is a positive function of wage differentials,
size differentials, income inequality differentials and a negative function of distance as proxy
variable for migration costs. The results of the estimation confirm that GDP per capita of
the destination countries as a proxy variable for wage differentials, and population of the
destination countries as a proxy variable for size differentials are important determinants
which significantly influence migration flows between 72 countries of origin and fifteen
European Union destination states.
Key words: Central and Eastern European countries, European Union, gravity models,
fixed effects model, migration, and panel data.
INTRODUCTION
Tinbergen (1962), Pöjhönen (1963) and Linnenmann (1966) first used the gravity model
to explain bilateral trade flows of some observed countries. Since then this instrument has
been widely used in the applied literature to evaluate the impact of regional agreements, 2
the impact of monetary union, and the impact of foreign direct investments on trade flows,
and to simulate trade potential. 3
The gravity equation has been successfully applied instead of trade flows to a whole
range of international flows, such as for instance immigration into European Union (EU)
member states (Marques, 2005, Svaton and Warin, 2007), and foreign direct investments,
immigration and EU enlargement (Breitenfellner et al., 2008). Thus the central aim of this
paper is to confirm the assertion that the gravity model, almost fifty years after its first
introduction, is still a useful workhorse for researchers. At a time when the issue of labour
mobility has never been more topical in the territory of Europe (Zimmerman, 2009), this
paper uses the gravity equation as a workhorse to analyse immigration into fifteen EU
member states. 4
For this purpose two different datasets on migration stocks and flows for fifteen EU member
states and 72 countries of origin were newly formed for each year over the period 1996
to 2006 using the OECD database. Thus one of the contributions of this paper is that it
compiles new datasets on migrant stocks and flows, which allow us to control a relatively
large set of fixed effects by using panel techniques suggested by Cheng and Wall (2005).
1
Stanislav Černoša is head of sales at Založba Aristej Maribor, Slovenia (cernosa@aristej.si).
2
For instance Caetano and Galego (2005), Bussierre et all (2005), Rault et all (2007)
3
See Egger (1999), Fuchs and Wohlrabe (2005).
4
The countries selected for analysis are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxemburg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom.
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