The Trading Potential of Eastern Europe

A gravity model of immigration

“…Immigration between pairs of countries may be zero in a substantial percentage of observations, and omitting those zero observations biases the regression results. Fortunately, all observations can be included by applying the scaled ordinary least squares (SOLS) method first applied by Wang and Winters (1992) and Eichengreen and Irwin (1995).…”

Estimation of the Gravity Equation in the Presence of Zero Flows

“…Alternatively, (part of the) zero values may be substituted by a small constant, so that the double-log model can be estimated without throwing these country pairs out of the sample. Examples in the literature that followed this approach are Linnemann (1966), Van Bergeijk and Oldersma (1990), Wang and Winters (1991) and Raballand (2003). Substituting small values prevents omission of observations from the sample, but is essentially ad hoc.…”

Russia and the WTO: The "Gravity" of Outsider Status

“…The absolute value of the distance coefficient is smaller than with exports as the dependent variable, whereas the opposite is true for the GDP coefficient. Additionally, the results were robust to different gravity model specifications (Linnemann, 1966;Bergstrand, 1985;and Wang and Winters, 1992), some of which included single-country population and GDP variables separately (instead of per capita GDP or a product of country-pair GDPs). In all such specifications, the statistical significance of the negative WTO coefficient remained largely intact.…”