Chapter 3Test of Bi-Proportional Fitting Procedure Applied to International Trade

Simone Caschili and Alan G. Wilson

3.1 Introduction

In this chapter, we propose a bi-proportional fitting procedure to estimate bilateral trade between countries for seven macro sectors. We use the 40 countries of the World Input-Output Dataset (WIOD) in order to calibrate and validate our model; our data sources are WIOD (for total imports and exports per sector per country) and the COW Trade dataset (for total bilateral trade). We show that the proposed method is useful for the case of developing countries where there is a lack of data provided by governments, and it might reduce the level of trade information needed to evaluate international trade.

We estimate the international bilateral trade per macro sector, utilising the WIOD in order to calibrate the bi-proportional model for 40 countries. Our methodology can be useful for other cases when there is a lack of information on bilateral trade per sector (but not at the national level), such as evaluation of intra- and intersectoral dynamics at a macro level and how these affect the world economy.

Total bilateral trade at country level has been studied since the early 1960s using gravity models; see Tinbergen (1962), Pullianen (1963), and Linneman (1966), and more recently, Bergstrand (1989), Anderson and van Wincoop (2003) and Baldwin and Taglioni (2006).

Several authors have also paid attention to simultaneous exports and imports within industries ...

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