GLM estimation of trade gravity models with fixed effects

Egger, Peter; Staub, Kevin E.

doi:10.1007/s00181-015-0935-x

Cited by 69 publications

(83 citation statements)

References 25 publications

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“…This is in line with the results by Egger and Staub (2016) who obtain the same ranking of methods for their first quartile of distance coefficients.…”

Section: Distance Coefficient Across Estimation Methodssupporting

confidence: 91%

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

2016

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This paper compares various estimation methods often used in the estimation of gravity models of international trade. The authors first discuss different structural and consistent estimation techniques, their underlying assumptions and their impact on estimated coefficients. They then estimate the gravity model for global bilateral trade flows using various empirical methodologies. They focus on a comparison of the distance and border effects across estimation techniques. For the border effects they take into account adjacency effects as well as the distinction between intra-regional and inter-regional trade. Their findings confirm the significantly negative distance and the significantly positive adjacency effect across estimation methods, although the size of the effects varies substantially across methods. The border effects by global regions are much more sensitive -both in size and direction -to the applied estimation method. Although all estimation methods have their own merits and drawbacks, the authors provide some guidelines for future empirical research based on their findings.

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“…This is in line with the results by Egger and Staub (2016) who obtain the same ranking of methods for their first quartile of distance coefficients.…”

Section: Distance Coefficient Across Estimation Methodssupporting

confidence: 91%

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

2016

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“…log bilateral distance but also binary indicator variables measuring land adjacency, common language, common history) and

α_{k}

is the parameter on it (a partial elasticity for variables in logs and a partial semi‐elasticity for binary variables). We admit that

μ_{i}

and

m_{j}

have a structural interpretation and are nonlinear functions of

τ_{i j}

(see Eaton and Kortum, ; Anderson and van Wincoop, ; Fally, ; Egger and Staub, ). However, the latter is of minor importance here, since we condition on them through fixed effects (as, e.g., in Eaton and Kortum, ; Egger, Larch, Staub, and Winkelmann, ; Fally, ).…”

Section: A Gravity Model Of Services Tradementioning

confidence: 99%

The Role of Goods‐Trade Networks for Services‐Trade Volume

2015

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In this paper, we address the role of countries' goods trade networks for their services trade volume. The paper employs a large cross-section of bilateral trade data on aggregate cross-border goods and services sales and illustrates that the depth and overlap of two countries' services networks induce a positive direct impact on their services trade volume. The evidence takes into account that goods trade flows and networks are potentially endogenous so that the estimated direct effects support a causal interpretation. We find that the magnitude of the multilateral goods-trade network effect on the bilateral services-trade volume is much larger than that of bilateral goods-trade volume.

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“…Egger and Tarlea (2015) propose a multi-way clustering approach to consistently estimate the regression coefficients' standard errors pertaining to preferential trade agreements. Egger and Staub (2016) compare the suitability of various estimation approaches under an international economics general equilibrium perspective. Baltagi and Egger (2016) develop a quantile regression structural estimation solution for the gravity model.…”

Section: The Gravity Model Of Trade: Recent Developmentsmentioning

confidence: 99%

A Spatial-Filtering Zero-Inflated Approach to the Estimation of the Gravity Model of Trade

2018

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Nonlinear estimation of the gravity model with Poisson-type regression methods has become popular for modelling international trade flows, because it permits a better accounting for zero flows and extreme values in the distribution tail. Nevertheless, as trade flows are not independent from each other due to spatial and network autocorrelation, these methods may lead to biased parameter estimates. To overcome this problem, eigenvector spatial filtering (ESF) variants of the Poisson/negative binomial specifications have been proposed in the literature on gravity modelling of trade. However, no specific treatment has been developed for cases in which many zero flows are present. This paper contributes to the literature in two ways. First, by employing a stepwise selection criterion for spatial filters that is based on robust (sandwich) p-values and does not require likelihood-based indicators. In this respect, we develop an ad hoc backward stepwise function in R. Second, using this function, we select a reduced set of spatial filters that properly accounts for importer-side and exporter-side specific spatial effects, as well as network effects, both at the count and the logit processes of zero-inflated methods. Applying this estimation strategy to a cross-section of bilateral trade flows between a set of 64 countries for the year 2000, we find that our specification outperforms the benchmark models in terms of model fitting, both considering the AIC and in predicting zero (and small) flows.

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GLM estimation of trade gravity models with fixed effects

Cited by 69 publications

References 25 publications

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

Distance and Border Effects in International Trade: A Comparison of Estimation Methods

The Role of Goods‐Trade Networks for Services‐Trade Volume

A Spatial-Filtering Zero-Inflated Approach to the Estimation of the Gravity Model of Trade

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