Gravity model estimation with proxy variables and the impact of endogeneity on transportation planning

Louis de Grange (), Rodrigo Troncoso, Angel Ibeas and Felipe González

Transportation Research Part A: Policy and Practice, 2009, vol. 43, issue 2, 105-116

Abstract: This study presents an alternative method for estimating gravity models by multiple linear regression that is based on proxy variables, thus circumventing the endogeneity problems arising when least-squares estimators are used. The proxy variable approach generates consistent estimators for a gravity model without endogeneity bias. The presence of endogeneity is tested for using statistical tests developed specifically for our application. We conclude that proxy variables eliminate the endogeneity and produce consistent estimators in gravity models estimated using least squares. We also find, however, that endogeneity bias has no significant impact either on gravity model prediction or on urban transportation system planning processes based on such models.

Keywords: Gravity; model; Proxy; variables; Endogeneity; Bias; Consumer; surplus (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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