A Gravity Model with Variable Coefficients: The EEC Trade with Third Countries

Gravity models with fixed coefficients have been used to explain the trade flows between countries different in income levels and separated by long distances. It is unrealistic to assume that these models can hold with the same parameters across very heterogeneous countries. This paper proposes and estimates an international trade model with variable coefficients constructed by combining Pöy-hönen's and Linnemann's gravity-based trade models via the expansion method.     

The assumption of equilibrium in models of migration

In recent articles Evans (1990) and Harrigan and McGregor (1993) (hereafter HM) scrutinized the equilibrium model of migration presented in a 1989 paper by Schachter and Althaus. This model used standard microeconomics to analyze gross interregional migration flows based on the assumption that gross flows are in approximate equilibrium. HM criticized the model as theoretically untenable, while Evans summoned empirical as well as theoretical objections. HM claimed that equilibrium of gross migration flows could be ruled out on theoretical grounds. They argued that the absence of net migration requires that either all regions have equal populations or that unsustainable regional migration propensities must obtain. In fact some moves are inter- and other are intraregional. It does not follow, however, that the number of interregional migrants will be larger for the more populous region. Alternatively, a country could be divided into a large number of small regions that have equal populations. With uniform propensities to move, each of these analytical regions would experience in equilibrium zero net migration. Hence, the condition that net migration equal zero is entirely consistent with unequal distributions of population across regions. The criticisms of Evans were based both on flawed reasoning and on misinterpretation of the results of a number of econometric studies. His reasoning assumed that the existence of demand shifts as found by Goldfarb and Yezer (1987) and Topel (1986) invalidated the equilibrium model. The equilibrium never really obtains exactly, but economic modeling of migration properly begins with a simple equilibrium model of the system. A careful reading of the papers Evans cited in support of his position showed that in fact they affirmed rather than denied the appropriateness of equilibrium modeling. Zero net migration together with nonzero gross migration are not theoretically incompatible with regional heterogeneity of population, wages, or amenities.     

Ludwig Alsdorf 8.8.1904 – 25.3.1978

Indo-Iranian Journal -     

An equilibrium model of gross migration

ABSTRACT The paper presents and tests a new model of migration which differs significantly from the conventional disequilibrium approach. We show that variations in rates of gross migration across regions are equilibrium responses to variations in levels of amenities, governmental policies, etc. The model is tested using data on the gross migration of whites, 1975-80, together with amenities such as climate and with economic variables such as government services, taxes and unionization. Empirical results suggest that the equilibrium model is more consistent with actual migration patterns than is the conventional disequilibrium approach. We estimate compensating differentials and migration elasticities for these variables.