Determinants of Peruvian Agricultural Exports: A Gravity Model Approach

Peru’s agricultural exports have shown a steady increase over the last decade, mainly fueled by increased non-traditional agricultural exports. Considering this background, the thesis explores the use of a gravity model to evaluate the determinants of export flows for ten selected agricultural commodities from Peru to its seventeen major trading partners, over a period of 15 years (1995-2009) by using panel data analysis. The study extends the original gravity model of bilateral trade to investigate factors such as stage of economic development, consumer’s income level, exchange rate fluctuations and the impact of trade agreements on the export flows of the selected products. Estimates indicate that the size and wealth of trading partners, proxied by GDP and GNIc, does not seem to matter much for the exports of these commodities; and that distance, as a proxy of transportation costs, only matters for products with high perishable nature. The results of this study can generate insights for future research in disaggregate analysis of agricultural commodities