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Two Ways of Estimating a Transport Model

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  • Jansson, Torbjorn

Abstract

In this article, it is shown how the parameters of a transport model can be estimated in a way that, in contrast to previously used methods, utilizes observations of regional prices as well as of trade costs. The proposed method uses bi-level programming 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. We use Monte-Carlo simulations 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 efficiently.

Suggested Citation

  • Jansson, Torbjorn, 2005. "Two Ways of Estimating a Transport Model," Discussion Papers 18787, University of Bonn, Institute for Food and Resource Economics.
    • Handle: RePEc:ags:ubfred:18787
    DOI: 10.22004/ag.econ.18787
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    References listed on IDEAS

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    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    2. Thomas Heckelei & Hendrik Wolff, 2003. "Estimation of constrained optimisation models for agricultural supply analysis based on generalised maximum entropy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(1), pages 27-50, March.
    3. G. G. Judge & T. D. Wallace, 1958. "Estimation of Spatial Price Equilibrium Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 40(4), pages 801-820.
    4. Ramon Guajardo & Homero Elizondo, 2003. "North American tomato market: a spatial equilibrium perspective," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 315-322.
    5. Kerry Litzenberg & Bruce A. McCarl & Joe Polito, 1982. "A Decomposition Solution for Spatial Equilibrium Problems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(3), pages 590-594.
    6. Peeters, Ludo, 1990. "A Spatial Equilibrium Model of the EC Feed Grain Sector," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 17(4), pages 365-386.
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    Cited by:

    1. Heckelei, Thomas & Britz, Wolfgang, 2005. "Models Based on Positive Mathematical Programming: State of the Art and Further Extensions," 89th Seminar, February 2-5, 2005, Parma, Italy 234607, European Association of Agricultural Economists.
    2. Heckelei, Thomas, 2005. "Shadow Prices in PMP and Consequences for Calibration and Estimation of Programming Models," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24688, European Association of Agricultural Economists.

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