The Role of Distance in the Gravity Model: From the View of Newton, International Economics and Quantum Mechanics

Abstract

The gravity model widely used in international economics in order to explain bilateral trade flows between countries has its roots in physics and the common variable suggested in both of the equations used in physics and economics is "distance". Although several variables expected to have significant effect on trade are added to the analysis in the field of international economics lately; distance is always considered as the first issue because of its correlation with transportation costs. Similarly, from it was first suggested by Newton in the equation of the universal gravity law to Einstein and to the recent finding in the field of quantum mechanics much attention has been paid to distance in physics research too. The aim of this paper is to examine the role of distance in the gravity models considering economic and physics perspectives with an eye to Newton's equation, Einstein's relativity and quantum mechanics.