世界发展银行-Gravity-Model_ndash_Based-Export-Potential---An-Application-to-Turkey_37页_1mb

Gravity Model-Based Export Potential: An Application to Turkey

Core Content

This paper introduces a framework for analyzing a country's export potential using the gravity model, and applies it to Turkey. The gravity model is a widely used empirical tool in international trade analysis that helps estimate the impact of trade policy, geography, and institutions on trade flows. The study extends the gravity model to assess export potential at aggregate, bilateral, and industry levels, providing insights into which markets and sectors are underperforming relative to their potential.

Main Points

1. Methodology

• The gravity model is used to estimate trade flows, incorporating the Poisson Pseudo Maximum Likelihood (PPML) estimator to address issues of zero trade flows and heteroskedasticity.
• The model includes remoteness indexes to control for multilateral resistance terms, improving the accuracy of the estimates.
• Additional controls for factor endowments (natural resources and capital per worker) are included to account for economic characteristics.
• The gravity equation is log-linearized and adjusted for time and country-specific effects.

2. Export Potential Findings

• Turkey was found to be moderately under-exporting during 2010–2017.
• The index of missing exports ranges from -100 to 100, with Turkey at 21, suggesting its exports should have been 53% higher than observed.
• The United States, China, and Japan are identified as key untapped markets, with missing exports estimated at $29 billion, $10 billion, and $7 billion, respectively.
• These countries account for 16–17% of total Turkish exports, highlighting significant opportunities for expansion.

3. Industry-Level Insights

• The electronics and chemical industries show high export potential.
• The gravity model is extended to 20 sectors, based on HS 6-digit classifications.
• The strategic sectors include a wide range of products such as food, textiles, machinery, and automotive, with specific focus on HS chapters 1–24, 28–38, 84–85, and 86–89.

4. Trade Policy Potential

• The paper uses data on deep trade agreements to assess the impact of trade policy on Turkey's exports.
• Turkey's trade is more sensitive to deep trade agreements compared to other countries.
• Modernizing existing preferential trade agreements (PTAs) could increase Turkey's exports to 9.2% of total trade, up from 1.8%.
• Key areas for reform include customs procedures, export taxes, technical barriers, sanitary standards, competition policy, and intellectual property rights.

Key Information

• Data Sources:
  • Trade flows and imports from the World Bank's WITS.
  • GDP and population data from the World Development Indicators (WDI).
  • Bilateral trade cost variables from the Market Access Map (MAcMap) and CEPII's gravity database.
• Estimation Period: 2000–2018.
• Sample Size: 105 countries, with a focus on Turkey.
• Key Variables:
  • RTA (Regional Trade Agreement): Positive effect on trade.
  • Distance: Negative effect on trade.
  • Language and Border: Positive effects on trade.
  • Remoteness indexes: Reflect market access and trade intensity.
• Index of Missing Exports:
  • Calculated as the difference between predicted and observed trade flows.
  • Provides a measure of export underperformance.
  • Targeted countries (from Export Master Plan) include Ethiopia, Morocco, Uzbekistan, and the UK.
  • Non-targeted countries with high potential include Italy, France, Greece, and Canada.
• Industry-Level Analysis:
  • Sectors with high export potential include electronics, chemicals, and textiles.
  • The model helps identify specific opportunities within these sectors.
• Policy Implications:
  • Improving trade agreements and reducing trade barriers can significantly enhance Turkey's export performance.
  • The study recommends focusing on modernizing PTAs and addressing non-tariff barriers to boost exports.

Conclusion

The paper provides a comprehensive analysis of Turkey's export potential using the gravity model, highlighting that the country is under-exporting to several major markets. It identifies key sectors and destinations where Turkey could increase its trade, and suggests that trade policy reforms are critical to unlocking this potential. The methodology used is robust and provides a benchmark for assessing export performance, contributing to the broader policy discussions on trade and economic development.