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A new estimator for trade costs and its small sample properties

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  • Jansson, Torbjörn
  • Heckelei, Thomas

Abstract

This paper discusses the estimation of parameters of a traditional transportation model, as it is typically present in so-called Takayama-Judge type spatial price equilibrium models. In contrast to previously used estimation methods, observations of regional prices as well as of trade costs are used in a direct estimation of the first order conditions. The proposed method uses bi-level programming techniques to minimize a weighted least squares criterion under the restriction that the estimated parameters satisfy the Kuhn-Tucker conditions for an optimal solution of the transport model. A penalty function and a smooth reformulation are used to iteratively approximate the complementary slackness conditions. Monte-Carlo simulations are used to trace out some properties of the estimator and compare it with a traditional calibration method. The analysis shows that the proposed technique estimates prices as well as trade costs more precisely than the traditional calibration method. It is suggested to apply the same method to a range of linear and quadratic models.

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  • Jansson, Torbjörn & Heckelei, Thomas, 2009. "A new estimator for trade costs and its small sample properties," Economic Modelling, Elsevier, vol. 26(2), pages 489-498, March.
    • Handle: RePEc:eee:ecmode:v:26:y:2009:i:2:p:489-498
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    References listed on IDEAS

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    Cited by:

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    3. Wang, X. & Dietrich, J.P. & Lotze-Campen, H. & Biewald, A. & Munson, T.S. & Muller, C., 2018. "Trading More Food in the Context of High-end Climate Change: Implications for Land Displacement through Agricultural Trade," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276997, International Association of Agricultural Economists.
    4. Paris, Quirino & Drogué, Sophie & Anania, Giovanni, 2011. "Calibrating spatial models of trade," Economic Modelling, Elsevier, vol. 28(6), pages 2509-2516.
    5. Torbjörn Jansson & Staffan Waldo, 2022. "Managing Marine Mammals and Fisheries: A Calibrated Programming Model for the Seal-Fishery Interaction in Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 501-530, March.
    6. Heckelei, Thomas & Britz, Wolfgang & Zhang, Yinan, 2012. "Positive Mathematical Programming Approaches – Recent Developments in Literature and Applied Modelling," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(1), pages 1-16, April.
    7. Valin, Hugo & Havlik, Petr & Mosnier, Aline & Obersteiner, Michael, 2012. "Impacts of Alternative Climate Change Mitigation Policies on Food Consumption under various Diet Scenarios," Conference papers 332253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
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    9. Quirino Paris & Sophie S. Drogue & Giovanni Anania, 2009. "Calibrating mathematical programming spatial models [Calibrage pour les modèles spatiaux de programmation mathématique]," Post-Print hal-02754337, HAL.
    10. Valin, Hugo & Havlik, Petr & Mosnier, Aline & Obersteiner, Michael, 2010. "Climate Change Mitigation And Future Food Consumption Patterns," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116392, European Association of Agricultural Economists.
    11. Mosnier, A. & Havlík, P. & Valin, H. & Baker, J. & Murray, B. & Feng, S. & Obersteiner, M. & McCarl, B.A. & Rose, S.K. & Schneider, U.A., 2013. "Alternative U.S. biofuel mandates and global GHG emissions: The role of land use change, crop management and yield growth," Energy Policy, Elsevier, vol. 57(C), pages 602-614.
    12. Santiago Guerrero & Ben Henderson & Hugo Valin & Charlotte Janssens & Petr Havlik & Amanda Palazzo, 2022. "The impacts of agricultural trade and support policy reform on climate change adaptation and environmental performance: A model-based analysis," OECD Food, Agriculture and Fisheries Papers 180, OECD Publishing.

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