Gravity models, PPML estimation and the bias of the robust standard errors

Michael Pfaffermayr

Applied Economics Letters, 2019, vol. 26, issue 18, 1467-1471

Abstract: In gravity models with exporter and importer dummies, the robust standard errors of the slope parameters tend to be severely downward biased when estimated by PPML. The coverage rate of confidence intervals of the estimated slope parameters may thus be much too small in cross-sections of the size typically used in empirical research.

Date: 2019
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DOI: 10.1080/13504851.2019.1581902

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