Structural gravity and fixed effects
Thibault Fally ()
Journal of International Economics, 2015, vol. 97, issue 1, 76-85
The gravity equation for trade flows is one of the most successful empirical models in economics and has long played a central role in the trade literature (Anderson, 2011). Different approaches to estimate the gravity equation, i.e. reduced-form or more structural, have been proposed. This paper examines the role of adding-up constraints as the key difference between structural gravity with “multilateral resistance” indexes and reduced-form gravity with simple fixed effects by exporter and importer. In particular, estimating gravity equations using the Poisson pseudo-maximum-likelihood estimator (Poisson PML) with fixed effects automatically satisfies these constraints and is consistent with the introduction of “multilateral resistance” indexes as in Anderson and van Wincoop (2003).
Keywords: Gravity; Structural estimation; Poisson-PML estimator (search for similar items in EconPapers)
JEL-codes: F10 F15 C13 C50 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (122) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Structural Gravity and Fixed Effects (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:97:y:2015:i:1:p:76-85
Access Statistics for this article
Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, AndrÃ©s
More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Haili He ().