On Estimation of Gravity Equation: A Cluster Analysis

Bozena Bobkova
Additional contact information
Bozena Bobkova: Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic

No 2014/37, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This article questions the slope homogeneity in a gravity equation and proposes a partially heterogeneous framework for its estimation using panel data. We suggest to employ K-mean clustering to group countries according to the gravity equation variables. Further, the gravity model is estimated on these created homogeneous groups. We apply this procedure on analysis of German trade data and confirm the slope heterogeneity in the model. When we estimate the model on each cluster separately, the estimated coefficients and their standard errors vary sufficiently. Moreover, we show that the pooled estimation technique severely under- or overestimate the effect of given variables.

Keywords: gravity model; K-mean clustering; Germany; slope heterogeneity (search for similar items in EconPapers)
JEL-codes: C23 C45 F10 F14 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-12, Revised 2014-12
New Economics Papers: this item is included in nep-ecm and nep-int
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ies.fsv.cuni.cz/sci/publication/show/id/5232/lang/cs (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ies.fsv.cuni.cz/sci/publication/show/id/5232/lang/cs [301 Moved Permanently]--> https://ies.fsv.cuni.cz/sci/publication/show/id/5232/lang/cs)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2014_37

Access Statistics for this paper

More papers in Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().