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Estimating the extensive margin of trade

Author

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  • Santos Silva, J.M.C.
  • Tenreyro, Silvana
  • Wei, Kehai

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.

Suggested Citation

  • Santos Silva, J.M.C. & Tenreyro, Silvana & Wei, Kehai, 2014. "Estimating the extensive margin of trade," Journal of International Economics, Elsevier, vol. 93(1), pages 67-75.
    • Handle: RePEc:eee:inecon:v:93:y:2014:i:1:p:67-75
    DOI: 10.1016/j.jinteco.2013.12.001
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    More about this item

    Keywords

    Bounded data; Estimation of trade models; Number of sectors;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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