Estimating the gravity model without gravity using panel data
Author
Summary, in English
This article examines the effects of zero trade on the estimation of the gravity model using both simulated and real data with a panel structure, which is different from the more conventional cross-sectional structure. We begin by showing that the usual log-linear estimation method can result in highly deceptive inference when some observations are zero. As an alternative approach, we suggest using the poisson fixed effects estimator. This approach eliminates the problems of zero trade, controls for heterogeneity across countries, and is shown to perform well in small samples.
Department/s
Publishing year
2011
Language
English
Pages
641-649
Publication/Series
Applied Economics
Volume
43
Issue
6
Document type
Journal article
Publisher
Routledge
Topic
- Economics and Business
Keywords
- panel data
- trade
- Poisson regression model
- Gravity model of trade
Status
Published
ISBN/ISSN/Other
- ISSN: 1466-4283