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The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic differences or distances between countries that companies should address when crafting international strategies. [1] It may also be used to understand patterns of trade, capital, information, and people flows. [2]
Shift of the world's economic center of gravity since 1980 and projected until 2050 [1]. The gravity model of international trade in international economics is a model that, in its traditional form, predicts bilateral trade flows based on the economic sizes and distance between two units. [2]
The Gravity model of trade presents a more empirical analysis of trading patterns. The gravity model, in its basic form, predicts trade based on the distance between countries and the interaction of the countries' economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects ...
Examinations of the Linder hypothesis have observed a "Linder effect" consistent with the hypothesis.Econometric tests of the hypothesis usually proxy the demand structure in a country from its per capita income: It is convenient to assume that the closer are the income levels per consumer the closer are the consumer preferences. [2]
When trade takes place between two or more states, factors like currency, government policies, economy, judicial system, laws, and markets influence trade. To ease and justify the process of trade between countries of different economic standing in the modern era, some international economic organizations were formed, such as the World Trade ...
gravity models, distance decay and other models of spatial interaction are based on the tendency of the volume of interaction between two locations to decrease as the distance between them increases due to the friction of distance, often in a pattern that is analogous (mathematically, not physically) to the Inverse-square law of many of the ...
Factor price equalization is an economic theory, by Paul A. Samuelson (1948), which states that the prices of identical factors of production, such as the wage rate or the rent of capital, will be equalized across countries as a result of international trade in commodities. The theorem assumes that there are two goods and two factors of ...
However, complete substitution between factors of production and commodities is only theoretical, and will only be fully realized under the economic model called the Heckscher–Ohlin model, or the 2×2×2 model, wherein there are two-countries, two-commodities, and two factors of production. While the assumptions of that model are unlikely to ...