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MENTAL MODEL · M4326

Gravity Model of Trade

Gravity Model of Trade
BusinessHigh supportEconomics
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Version 1.0.0 · Updated 2026-07-28

CORE DEFINITION

The gravity model of trade states that the volume of trade between two countries is proportional to their economic sizes (often measured by GDP). Larger economies produce more goods and services, and therefore export more. Similarly, larger economies have higher GDP, greater purchasing power, and are more capable of importing more goods. The simple gravity model assumes that economic size and distance are the main factors affecting trade. T. i. j. =. A. Y. i. Y. j. D. i. j. {\displaystyle T_{ij}=AY_{i}{\frac {Y_{j}}{D_{ij}}}}. T. i.

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The gravity model of trade states that the volume of trade between two countries is proportional to their economic sizes (often measured by GDP). Larger economies produce more goods and services, and therefore export more. Similarly, larger economies have higher GDP, greater purchasing power, and are more capable of importing more goods. The simple gravity model assumes that economic size and distance are the main factors affecting trade. T. i. j. =. A.

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The gravity model of trade draws on Newton's law of universal gravitation, positing that bilateral trade between two countries is proportional to their economic sizes (GDP) and inversely proportional to the geographical distance between them. It is one of the most robust empirical regularities in international trade.

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Source support: Explicit

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    zh.wikipedia.orghttps://zh.wikipedia.org/wiki/%E8%B4%B8%E6%98%93%E5%BC%95%E5%8A%9B%E6%A8%A1%E5%9E%8BZH · Explicit
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