Work detail

The Gravity Model and Effects of Opening the Northern Sea Route: Industry Level Trade Analysis

Author: Bc. Juyeong Jeong
Year: 2020 - summer
Leaders: Ing. Vilém Semerák M.A., Ph.D.
Work type: Bachelors
Language: English
Pages: 71
Awards and prizes:
Abstract: Abstract The future opening of the Northern Sea Route will decrease the maritime distance between Europe and East Asia relative to currently used routes. Due to this reason, the Northern Sea Route has been researched and analyzed by various scholars. However, the development of the passage is rather slow because of the lack of attention from possible future users such as shippers or producers. Their moderate interest might be caused by the uncertainty of possible benefits in their specific industry. To diffuse their concern, this paper measures the possible direct effects on trade in industry level based on the current characteristics of the world trade. For a better estimation, various models are used and tested. This paper finds that the Poisson Pseudo Maximum Likelihood (PPML) outperforms Ordinary Least Squares (OLS); negative elasticity of maritime distance; ‘primary sector’ and ‘sectors produce heavy or dangerous goods’ from Northeastern European countries are likely to experience a higher increment in exports by using the Northern Sea Route than other European sectors. According to the findings, the continual or more attention on the Northern Sea Route is advised to lower the transport costs of usage for the maximization of welfare.


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