The Poisson quasi-maximum likelihood estimator: A solution to the “adding up” problem in gravity models

Jean-Francois Arvis and Ben Shepherd

MPRA Paper from University Library of Munich, Germany

Abstract: This paper shows that the Poisson quasi-maximum likelihood estimator applied to the gravity model produces estimates in which, summing across all partners, actual and estimated total trade flows are identical. Other methods such as OLS do not have this desirable property. Indeed, Poisson is the only quasi-maximum likelihood estimator that preserves total trade flows. This result is an additional reason for preferring Poisson as a workhorse gravity model estimator.

Keywords: International Trade; Gravity Model; Poisson; Quasi-Maximum Likelihood Estimator (search for similar items in EconPapers)
JEL-codes: C10 F10 (search for similar items in EconPapers)
Date: 2011-10-25
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (5)

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Journal Article: The Poisson quasi-maximum likelihood estimator: a solution to the ‘adding up’ problem in gravity models (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34334

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