A theoretical extension of the gravity model and its application in the trade field

Purpose This purpose of this study is to extend the traditional gravity framework by examining how BRICS economies with highly asymmetric growth trajectories and heterogeneous global value chain integration engage in bilateral trade under evolving geopolitical and policy conditions. While standard gravity models assume symmetric trade responses and static resistance terms, BRICS economies exhibit distinct patterns, commodity exporters (Brazil, Russia, South Africa) trade differently with manufacturing powerhouses (China, India) than traditional North-South or intra-OECD flows. By incorporating time-varying multilateral resistance terms (MRTs), GDP growth differentials and policy–macroeconomic interactions, this framework captures the nonlinear and asymmetric effects that characterize South-South trade cooperation. The model demonstrates that trade agreement effectiveness varies by economic size disparity, distance frictions decline asymmetrically for larger BRICS members, and non-tariff barriers (NTBs) exhibit hysteresis effects absent in developed economy context. Design/methodology/approach Using panel data, the study introduces three key methodological advancements to extend the understanding of trade patterns. First, explicit modeling of MRTs as explanatory variables rather than absorbed fixed effects, enabling direct measurement of third-country competition; Second, dynamic specifications with lagged trade flows to distinguish immediate versus cumulative policy impacts. Third, threshold regression to identify structural breaks in GDP–distance–RTA relationships. Empirical validation is conducted through pooled ordinary least squares, fixed-effects modeling, and Poisson–pseudo maximum likelihood estimation to ensure robustness and statistical significance. Findings Three BRICS-specific patterns emerge: First, GDP asymmetry amplifies trade (β = 0.034, p < 0.01) more strongly within BRICS (elasticity 0.041) than OECD pairs (0.028), suggesting complementarity between commodity suppliers and manufacturers. Second, a threshold effect at the 75th percentile of GDP differences reveals that China-India trade with smaller BRICS members follows different dynamics than intra-giant commerce. Third, NTB persistence in BRICS economies (half-life: 4.2 years) exceeds that in OECD countries (2.8 years), indicating institutional and infrastructure deficits that prolong trade cost effects. Regional trade agreements reduce GDP-driven trade imbalances by 5.7%, but effectiveness varies: agreements benefit large BRICS exporters 40% more than smaller members. The model achieves 88.2% explanatory power, substantially outperforming standard specifications (typically 65%–75% for emerging markets). The model demonstrates a strong explanatory power accounting for 88.2% of the variation in trade flows. Originality/value This study contributes to the trade literature by developing a theoretically rigorous and empirically validated extension of the gravity model. It challenges the traditional symmetry assumption and highlights the critical role of GDP disparities in global trade. By integrating spatial dependence and economic complexity, the model provides enhanced predictive accuracy and deeper insights into the dynamics of international trade. The application to BRICS economies serves as a policy-relevant example, offering guidance for trade agreements and infrastructure strategies in contexts characterized by uneven economic development.