On Border Effect Gravity Model for Agricultural Trade

Three border effect models capturing the unique characteristics of agricultural trade based on the gravity model are put forward and further contrasted to study China-U.S. border effects for agricultural trade covering the panel data over the period of 1987-2007. The results show that the third model -fixed effects model considering the heterogeneity of each trading pair is preferred in this regard. The border effects for agricultural trade tend to be significantly large, and vary from international trade direction and across regions, but the models without considering these differences tend to overestimate the border effects for China-U.S. agricultural trade over this period.