International trade relations of enterprises established in Poland's regions: gravity model panel estimation

We apply conventional panel data approaches to a comprehensive analysis of the gravity equation of bilateral trade flows between 16 Polish NUTS2 regions and 205 countries and territories over 1999-2011. Empirical analysis clearly demonstrates that gravity model fits the data reasonably well and provides sensible results in accordance with our expectations. Basic parameters as: distance, regions’ and countries’ GDP have statistically significant influence on dependent variable. We realize that gravity concept is often regarded as controversial, and doubts relate predominantly to its theoretical background. The question is that it treats economic relations in a too “mechanical” way. However the advantage of gravity approach is that it takes into account features of both, regions and countries, in analysis of trade flows intensity.