Gravity Equation and Trade Agreements: A Different Econometric Approach

María Recalde, Luis Marcelo Florensa () and Iván Iturralde ()
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Iván Iturralde: Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas (Córdoba, Argentina)

Revista de Economía y Estadística, 2008, vol. 46, issue 2, 83-104

Abstract: This paper is aimed at multiplicatively estimating the parameters of the gravity equation by using the Poisson Pseudo-Maximum-Likelihood (PPML) estimator, and taking heteroskedasticity into account at the same time. Besides, in order to compare the results, the model will be estimated trough OLS and Tobit, and the precision of the different estimators will be assessed by a set of specification tests. Results indicate that the effects of Preferential Trade Agreements are very sensitive to the method chosen to estimate the gravity model and the results obtained under PPML are the most reliable.

Keywords: Preferential trade agreements; gravity model; trade creation and trade diversion; generalized lineal models (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ief:reveye:v:46:y:2008:i:2:p:83-104

DOI: 10.55444/2451.7321.2008.v46.n2.3853

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