Estimating gravity equation models in the presence of sample selection and heteroscedasticity

Bo Xiong () and Sixia Chen

Applied Economics, 2014, vol. 46, issue 24, 2993-3003

Abstract: Gravity models are widely used to explain patterns of trade. However, two stylized features of trade data, sample selection and heteroscedasticity challenge the estimation of gravity models. We propose a two-step method of moments (TS-MM) estimator that deals with both issues. The Monte-Carlo experiments show that the TS-MM estimates are resistant to various combinations of sample selection and heteroscedasticity. Moreover, the TS-MM estimator performs reasonably well even when the data generating process deviates from the TS-MM assumptions. We revisit the world trade in 1990 to illustrate the usefulness of the proposed model, with emphasis on the identification of the extensive margin of trade.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2014.920481 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Estimating Gravity Equation Models in the Presence of Sample Selection and Heteroskedasticity (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:46:y:2014:i:24:p:2993-3003

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2014.920481

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().