Gravity Model of Trade

T_{ij} = A \frac{Y_i Y_j}{D_{ij}^\beta}

Trade between countries proportional to economic size and inversely to distance.

By Jan Tinbergen

Social Sciences

1962 · Jan Tinbergen

Why it matters: Most successful empirical model in international economics.

Discoverers: Jan Tinbergen (1962)

What does it mean?

Trade between countries proportional to economic size and inversely to distance.

Most successful empirical model in international economics.

Symbol	Name	Unit	Meaning
$T_ij$	Trade flow	—	Exports from i to j
$Y_i,Y_j$	GDP	—	Economic size
$D_ij$	Distance	—	Geographic distance
$β$	Distance elasticity	—	Typically ~1

Doubling both economies quadruples trade; doubling distance halves it.

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Equation Universe

T_{ij} = A \frac{Y_i Y_j}{D_{ij}^\beta}

Real-world impact

Global economy

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Photo: Unsplash — financial markets

Trade between countries proportional to economic size and inversely to distance.

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