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Two-Way Models for Gravity

Koen Jochmans

SciencePo Working papers Main from HAL

Abstract: Empirical models for dyadic interactions between n agents often feature agent-specific parameters. Fixed-effect estimators of such models generally have bias of order n−1, which is non-negligible relative to their standard error. Therefore, confidence sets based on the asymptotic distribution have incorrect coverage. This paper looks at models with multiplicative unobservables and fixed effects. We derive moment conditions that are free of fixed effects and use them to set up estimators that are n-consistent, asymptotically normally-distributed, and asymptotically unbiased. We provide Monte Carlo evidence for a range of models. We estimate a gravity equation as an empirical illustration.

Date: 2017-07-01
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Citations: View citations in EconPapers (1)

Published in Review of Economics and Statistics, 2017, 99 (3), pp.478-485. ⟨10.1162/REST_a_00620⟩

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Journal Article: Two-Way Models for Gravity (2017) Downloads
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Working Paper: Two-way models for gravity (2015) Downloads
Working Paper: Two-way models for gravity (2015) Downloads
Working Paper: Two-way models for gravity (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03567923

DOI: 10.1162/REST_a_00620

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