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Estimating the gravity model without gravity using panel data

Westerlund, Joakim LU and Wilhelmsson, Fredrik LU (2011) In Applied Economics 43(6). p.641-649
Abstract
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.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
panel data, trade, Poisson regression model, Gravity model of trade
in
Applied Economics
volume
43
issue
6
pages
641 - 649
publisher
Routledge
external identifiers
  • wos:000287412700001
  • scopus:79951686244
ISSN
1466-4283
DOI
10.1080/00036840802599784
language
English
LU publication?
yes
id
f139cb53-ec55-46fd-97c0-9f2de59ea66f (old id 1764982)
date added to LUP
2011-01-27 10:10:55
date last changed
2017-11-12 03:04:32
@article{f139cb53-ec55-46fd-97c0-9f2de59ea66f,
  abstract     = {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.},
  author       = {Westerlund, Joakim and Wilhelmsson, Fredrik},
  issn         = {1466-4283},
  keyword      = {panel data,trade,Poisson regression model,Gravity model of trade},
  language     = {eng},
  number       = {6},
  pages        = {641--649},
  publisher    = {Routledge},
  series       = {Applied Economics},
  title        = {Estimating the gravity model without gravity using panel data},
  url          = {http://dx.doi.org/10.1080/00036840802599784},
  volume       = {43},
  year         = {2011},
}