The Impact of Export Sophistication on Bilateral Trade Flow: a Gravity Model
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DOI: 10.38007/Proceedings.0000115
Corresponding Author
Xiankun Li
Abstract
Based on the extended gravity model, this paper analyses the influence of export sophistication on bilateral trade. On the basis of the export sophistication measurement method proposed by Hausmann et al. (2007), this paper calculates the export sophistication of China and 56 trading partner countries in 2000-2017, and then uses cross-border panel data to empirically test the impact of export sophistication on bilateral trade. The results show that the increase of export sophistication has a positive impact on bilateral trade flows. The empirical results of this paper also confirm the previous scholars' conclusion that the trade scale between the two countries is directly proportional to their economic scale, and inversely proportional to their distance. Population and real exchange rate have uncertain impact on trade; the increase of trade freedom will expand the scale of bilateral trade; regional economic organizations and preferential trade agreements will promote bilateral trade. Finally, based on the empirical results, this paper puts forward some policy suggestions for China and other countries, especially for developing countries, to enhance the complexity of their exports, expand bilateral trade and open up international markets.
Keywords
Export Sophistication; Bilateral Trade; Gravity Model