Analysis of inter-provincial trade in the framework of the gravity model in Turkey: Case of Kastamonu

In this study, In the global world where trade is seen as a driving force for development, it is aimed to explain the importance of domestic trade in terms of regional development of Turkey and the factors affecting domestic trade with Kastamonu example. For this purpose, a micro panel data set covering the years 2006-2017 is used. In order to determine the factors affecting domestic trade, the Gravity Model adapted by Tinbergen for trade, inspired by Isaac Newton's Law of Gravity, is used. The Gravity Model suggests that the two most important factors affecting bilateral trade flows are "gross domestic product" and "geographical distance". According to the Gravity Model, bilateral trade flows are positively affected by gross domestic product and negatively affected by geographic distance. In addition to these two Simple Gravity Model variables, the Extended Gravity Model created with the "population" and "border neighborhood" variables included in the model was tested with two different methods, by the name of "Panel random effects" and "PPML". According to the findings, while simple variables give results parallel to the Gravity Model assumptions, the findings of the variables that were included in the model later differ according to the methods.