 A new estimator for trade costs and its small sample propertiesTorbjörn Jansson and Thomas Heckelei Economic Modelling, 2009, vol. 26, issue 2, 489-498 Abstract: This paper discusses the estimation of parameters of a traditional transportation model, as it is typically present in so-called Takayama-Judge type spatial price equilibrium models. In contrast to previously used estimation methods, observations of regional prices as well as of trade costs are used in a direct estimation of the first order conditions. The proposed method uses bi-level programming techniques to minimize a weighted least squares criterion under the restriction that the estimated parameters satisfy the Kuhn-Tucker conditions for an optimal solution of the transport model. A penalty function and a smooth reformulation are used to iteratively approximate the complementary slackness conditions. Monte-Carlo simulations are used to trace out some properties of the estimator and compare it with a traditional calibration method. The analysis shows that the proposed technique estimates prices as well as trade costs more precisely than the traditional calibration method. It is suggested to apply the same method to a range of linear and quadratic models. Keywords: Trade; cost; Spatial; price; equilibrium; Bi-level; programming (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:26:y:2009:i:2:p:489-498 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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