Estimating the gravity equation with the actual number of exporting firms

Asier Minondo () and Francisco Requena Silvente

Estudios de Economia, 2013, vol. 40, issue 1 Year 2013, 5-19

Abstract: To estimate correctly the effect of variable trade costs on firms’ exports, the gravity equation should control for the number of firms that participate in foreign markets. Due to the absence of these data, previous studies control for this omitted variable using econometric strategies that may also lead to inconsistent estimates. To overcome this problem the present paper estimates a gravity equation using a new database compiled by the OECD and Eurostat stat that reports the number of exporting firms by reporter and partner country. We show that not controlling for the extensive margin of trade introduces very serious biases in the estimated trade cost coefficients.

Keywords: Gravity equation; exporting firms; distance; trade costs; OECD. (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.estudiosdeeconomia.cl/publicacion/show/id/1376 (application/pdf)

Related works:
Working Paper: Estimating the gravity equation with the actual number of exporting firms (2011)
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:udc:esteco:v:40:y:2013:i:1:p:5-19

Access Statistics for this article

Estudios de Economia is currently edited by Rómulo Chumacero

More articles in Estudios de Economia from University of Chile, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Verónica Kunze ().