Seaborne trade between developed and developing countries

Abstract

This paper analyses the international grain trade flow by using the gravity equation of trade. On the basis of microeconomic theory and the new trade theory, the gravity equation of trade is used to examine grain exports and imports between pairs of countries. One of the main purposes of this paper is to examine how the grain trade is affected by economic factors, population, and country development. By using data of 41 major trading countries over 14 years (1996-2009), the gravity equation of two different specifications are deployed for the investigation. The analysis differentiates between developed and developing countries and identifies the differences between different pairing. Importer's GDP lead to grain trade growing much faster than exporter's GDP. Developing countries tend to import less grain but developed countries import more, if the population is higher. The paper provides a new insight about the grain trade flow between developed and developing countries.