Trade Structure and Trade Flows in Cambodia: A Gravity Model

Abstract

This paper studies Cambodia's bilateral trade flows through investigating the impact of trade structure in a framework of the gravity equation over the period 2000-2004 after its entry into the ASEAN Free Trade Area (AFTA). The measure of trade structure is constructed by the degree of trade complementarity between Cambodia and its trading partners. The empirical results show that a higher degree of trade complementarity is associated with a higher level of trade flows. This could be consistent with a Heckscher-Ohlin model in that factor endowment difference between the countries, which is captured by the measure of trade structure, is a dominant driving force for trade flows. Some related implications are also discussed.

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