WHAT REALLY DETERMINES POLISH EXPORTS? THE SEMI-MIXED EFFECTS GRAVITY MODEL FOR POLAND

The goal of this article is to investigate the determinants of the intensity of Polish exports with the use of the trade gravity approach in a panel data set covering the period 1999-2013. In an attempt to obtain unbiased results we utilize the semi-mixed effect method using PPML estimator as suggested by the recent empirical literature. In the basic version of the trade gravity model, we take into account the standard factors suggested by the literature of the subject. In its extended version, we control for additional factors including relative endowments of factors of production, a technological gap as measured by TFP and relative patenting performance, quality of institutions or impact of regional and bilateral trade agreements or exchange rate volatility. In most of the cases, the coefficients for the traditional gravity determinants are economically sensible and their impact on the dependent variable is statistically significant. The gravity approach proves to be a robust tool for identifying the determinants of trade intensity and thus for predicting future trade flows.