Estimating the extensive margin of trade

João Santos Silva, Silvana Tenreyro and Kehai Wei

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Understanding and quantifying the determinants of the number of sectors or firms exporting in a given country is of relevance for the assessment of trade policies. Estimation of models for the number of exporting sectors, however, poses a challenge because the dependent variable has both a lower and an upper bound, implying that the partial effects of the explanatory variables on the conditional mean of the dependent variable cannot be constant. We argue that ignoring these bounds can lead to erroneous conclusions and propose a flexible specification that accounts for the doubly-bounded nature of the dependent variable. We empirically investigate the problem and the proposed solution, finding significant differences between estimates obtained with the proposed estimator and those obtained with standard approaches.

Keywords: bounded data; estimation of trade models; number of sectors (search for similar items in EconPapers)
JEL-codes: C13 C25 C51 F11 F14 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (51)

Published in Journal of International Economics, May, 2014, 93(1), pp. 67-75. ISSN: 0022-1996

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Related works:
Working Paper: Estimating the Extensive Margin of Trade (2015)
Journal Article: Estimating the extensive margin of trade (2014)
Working Paper: Estimating the Extensive Margin of Trade (2012)
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