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Unconditional Quantile Estimation: An Application to the Gravity Framework

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  • Cairns, Alexander P.
  • Ker, Alan
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    Abstract

    Since its inception, the gravity model has been the cornerstone of empirical trade analysis. It has been used to estimate the marginal e↵ects of various determinants of trade as well as to test hypothesized relationships, many of which have direct and significant policy implications. Conventional estimation methods derive the marginal e↵ects of the covariates at the mean; or rather, only estimate the average e↵ect of an explanatory variable on trade flows. This study applies unconditional quantile estimation (UQE), as developed by Firpo, Fortin, and Lemieux (2009), to a variant of the gravity model developed by Hallak (2006) in order to obtain income and distance elasticity estimates for imports of six di↵erentiated agrifood products. Findings suggest that both income and distance elasticity estimates do vary across quantiles, suggesting that conventional estimation methods may limit the depth of analysis. The estimated income elasticities vary across products as well, both in terms of the underlying trends across quantiles and in magnitude, further demonstrating the capacity of UQE to identify how the underlying trend across quantiles is conditional on the product under examination.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150399.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:150399

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    Keywords: International Relations/Trade; Research Methods/ Statistical Methods;

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    1. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    2. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
    3. Jayasinghe, Sampath J.D.Y. & Beghin, John C. & Moschini, GianCarlo, 2010. "Determinants of World Demand for U.S. Corn Seeds: The Role of Trade Costs," Staff General Research Papers 31493, Iowa State University, Department of Economics.
    4. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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