POLICY MEASUREMENT AND MULTILATERAL RESISTANCE IN GRAVITY MODELS
Maria Cipollina (),
Luca De Benedictis (),
Luca Salvatici () and
Claudio Vicarelli ()
Additional contact information
Claudio Vicarelli: ISTAT
No 16130, Working Papers LuissLab from Dipartimento di Economia e Finanza, LUISS Guido Carli
Over the past decade, the gravity equation has emerged as the empirical workhorse in international trade to study the ex-post effects of trade policies on bilateral trade. In this paper we are concerned with the issue of how the econometric specification and the policy measurement choices can affect the goal to obtain accurate estimates of the coefficient associated with bilateral trade policies within a theoretically-consistent model. The problem is even more serious when the policy treatment is approximated through dummies as it is still often the case in the literature. Using a Monte Carlo simulation analysis, this paper shows that the use of fixed effects to control for unobserved heterogeneity leads to biased estimates of the policy impact even when the policy is measured through a continuous variable. The bias highlighted by our results is the combination of measurement error about bilateral trade costs (or preferences) and the specification used to proxy multilateral resistance terms.
Keywords: Gravity model; Multilateral trade resistance; Policy evaluation; Monte Carlo Analysis. (search for similar items in EconPapers)
JEL-codes: C10 C50 F14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: Policy Measurement and Multilateral Resistance in Gravity Models (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:lui:lleewp:16130
Access Statistics for this paper
More papers in Working Papers LuissLab from Dipartimento di Economia e Finanza, LUISS Guido Carli Contact information at EDIRC.
Bibliographic data for series maintained by Giovanna Vallanti ().