Destinations of Irish Exports: A Gravity Model Approach

Abstract

This paper uses a gravity model approach in order to analyse the geographical patterns of Irish exports. The gravity model in international trade has been demonstrated to be an extremely robust empirical method. The gravity model is first applied to aggregate Irish exports from 1980 to 2007. Distance is found to have a strong negative effect on exports. On the other hand, exports are positively related to sharing a common language and when communications infrastructure is well developed. The gravity model is shown to fit the data extremely well. We then use firm-level data on indigenous Irish exporters to divide the effects of trade costs into how they influence the number of firms exporting to each market and the average exports per firm. Finally, the firm data is divided into four broad sectors to examine if there is any sectoral variation in the standard results.