Treatment of endogenous monadic variables in gravity equations

Omer Bayar

International Review of Economics & Finance, 2017, vol. 52, issue C, 21-28

Abstract: In the presence of country fixed effects, monadic variables are not identified in the traditional gravity equation. The paper uses a hybrid two-stage treatment model to overcome the identification problem. The model also accommodates endogeneity in monadic variables. An application to the trade impact of the Olympic Games is presented. Results highlight the empirical significance of endogeneity left untreated in the gravity equation.

Keywords: Monadic variables; Two-stage model; Treatment; Olympics (search for similar items in EconPapers)
JEL-codes: C2 F14 Z2 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:52:y:2017:i:c:p:21-28

DOI: 10.1016/j.iref.2017.09.003

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