Based on gravity trade model and Linder Hypothesis: An empirical application to China-EU trade flows

This paper applies the gravity trade model, as well as Linder Hypothesis, to assess China-EU trade. The model is tested for a sample of 25country-pairs and 250 observations. A panel data analysis is used to disentangle the time invariant country-specific effects and to capture the relationships between the relevant variables over time. We find that both gravity trade model and Linder Hypothesis hold quite well in the empirical work in this paper. What´s more, the inherent policy implication for China is to strive to narrow the income gap between him and other trade partners in order to take full advantage of the benefits of trade.