Title: ?????????????? – ??Gravity ????? (Effect of economic cooperation between Japan and South Korea - analyzed using Gravity Model), from Economic Science 2004, Issue 3, Page 113 – 120.

Author: ?????? (Kim In Kyu, school of Economics, Peking University)

Gravity model

LogTij=Loga0+a1LogYi+a2LogYj+a3Logpopi+a4Logpopj+a5LogDij+a6LogPijCJK+Logeij

The meaning of variables

Tij represents the total amount of trade between the two countries. Dij represents the distance between country i and country j. Yi and Yj represent each country’s GDP. popi and popj represent each country’s population. PijCJK represents virtual variables for economic cooperation between China, Japan and Korea. eij represent random disturbance.

Brief Description

The data analyzed in this article are panel data from the five years of 1990, 1993, 1998, 2000 and 2002, and the data used in the analysis are data collected from 13 countries during the five years. The results of data analysis show that in 1990, the trade between China, Japan and South Korea still had a strong tendency of mutual exclusion. In the regression equation in 1990, the adjusted R^2 value was not high enough, and the value of the F statistic was very small, indicating that it was meaningless to consider economic cooperation under the conditions at that time. In the regression equation of 1993, the coefficient of the cooperative virtual variable was significantly higher than that in 1990, indicating that the trade of the three countries is no longer as strongly mutually exclusive as in 1990. But under this circumstance, economic cooperation still has no effect, and the reduction of trade barriers among the three countries still cannot increase trade volume between each other. Compared with 1993, there was a positive cooperation effect in 1998. Based on the analysis of the effects of trade expansion, the effects of the functional economic cooperation between China, Japan and South Korea began to appear in 1998. In 2000, due to the Asian financial crisis, this year's economic cooperation failed to show obvious results. In 2002, the results obtained from relevant data can judge the existence of potential trade cooperation among the three countries.

The analysis of the effects of changes in the trade structure can be seen from the changes in the coefficients of independent variables such as population, GDP, and distance. The coefficients of the population in the five-year equations analyzed are relatively small and decrease sequentially, indicating that the population has a small impact on trade, and with economic development, the role of population becomes less and less important. Secondly, the coefficients of each country's GDP also show a downward trend, which shows that the contribution rate of each country's wealth to the trade volume has declined. The coefficient of distance has increased since 1993 compared to 1990, and has declined to a certain extent after 2002.

This paper uses the 2002 regression equation estimated by the Gravity model to predict the effect of functional economic cooperation between the three countries before the institutional economic cooperation is realized. This article also used the data of 2002 and previous years for making a prediction of the three countries? GDP and population in 2005, to predict the effect of functional economic cooperation. According to the inferred equation in 2002, the data of China, Japan and South Korea were used for point forecasting, and the trade volume of China, Japan and South Korea in 2005 was estimated as follows: trade between China and Japan reached 111.42 billion USD, and between China and South Korea reached 51.97 billion USD, Japan and South Korea reached 74.92 billion USD, and the total trade volume of the three countries reached 238.31 billion USD. The analysis of trade growth shows that by 2005, the trade volume of China, Japan and South Korea continued to grow. From 1990 to 2005, the trade volume between China, Japan and South Korea has been growing.

This article uses the Gravity model to analyze the effects of economic cooperation among China, Japan and South Korea. The analysis results show that the existing economic cooperation between China, Japan and South Korea has realized remarkable achievement.