The paper analyzes two main theories of international trade—the Heckscher-Ohlin (H-O) model and the Increasing Returns to Scale (IRS) model—to determine which can explain the empirical success of the Gravity Equation. The Gravity Equation predicts that trade volume is positively related to GDPs and negatively related to trade barriers. Both models can generate this prediction, but the paper focuses on identifying which model better explains the empirical success. The paper finds that the H-O model predicts inter-industry trade, while the IRS model predicts intra-industry trade. The analysis shows that the H-O model with perfect product specialization is unlikely to explain the Gravity Equation because factor endowment differences are typically small. Instead, IRS-based models are more important in explaining the success of the Gravity Equation, especially among industrialized countries. The paper also finds that the Gravity Equation fits trade flows well among industrialized countries due to IRS-based trade, which is consistent with the theory. The paper also addresses the issue of model identification, showing that the Gravity Equation can be derived from different models, but the empirical success of the Gravity Equation is better explained by IRS-based models. The paper uses data from 1985 to analyze trade flows and finds that the Gravity Equation is more accurately predicted by IRS-based models in samples with higher Grubel-Lloyd indices, which indicate more intra-industry trade. The paper concludes that both the H-O and IRS models explain different components of international trade patterns and trade volumes. The H-O model is more relevant for explaining trade between countries with large factor endowment differences and low intra-industry trade, while the IRS model is more relevant for explaining trade between countries with high intra-industry trade. The paper also notes that the success of the Gravity Equation is more closely related to IRS-based trade than to the H-O model.The paper analyzes two main theories of international trade—the Heckscher-Ohlin (H-O) model and the Increasing Returns to Scale (IRS) model—to determine which can explain the empirical success of the Gravity Equation. The Gravity Equation predicts that trade volume is positively related to GDPs and negatively related to trade barriers. Both models can generate this prediction, but the paper focuses on identifying which model better explains the empirical success. The paper finds that the H-O model predicts inter-industry trade, while the IRS model predicts intra-industry trade. The analysis shows that the H-O model with perfect product specialization is unlikely to explain the Gravity Equation because factor endowment differences are typically small. Instead, IRS-based models are more important in explaining the success of the Gravity Equation, especially among industrialized countries. The paper also finds that the Gravity Equation fits trade flows well among industrialized countries due to IRS-based trade, which is consistent with the theory. The paper also addresses the issue of model identification, showing that the Gravity Equation can be derived from different models, but the empirical success of the Gravity Equation is better explained by IRS-based models. The paper uses data from 1985 to analyze trade flows and finds that the Gravity Equation is more accurately predicted by IRS-based models in samples with higher Grubel-Lloyd indices, which indicate more intra-industry trade. The paper concludes that both the H-O and IRS models explain different components of international trade patterns and trade volumes. The H-O model is more relevant for explaining trade between countries with large factor endowment differences and low intra-industry trade, while the IRS model is more relevant for explaining trade between countries with high intra-industry trade. The paper also notes that the success of the Gravity Equation is more closely related to IRS-based trade than to the H-O model.