A Gravity Model of China's Agricultural Trade Balance: Empirical Tests

Abstract

From the year 1998 to 2010, China's agricultural trade balance had become deteriorating. The change not only decreases the enthusiasm in agricultural production, and may even threaten the grain production security. To find out the key factors influencing the agricultural trade balance, this paper develops a new gravity model of agricultural trade balance by using weighted distance and introducing comparative quantity of bilateral trade. Furthermore, the robustness of the model is discussed, such as heteroskedasticity, autocorrelation and endogeneity. According to the regression results, the corresponding recommendations are suggested for improving Chinese agricultural balance.