Estimating the Extensive Margin of Trade
AbstractUnderstanding 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 sectors, however, poses a challenge because the dependent variable has both a lower and upper bound, implying that the partial effects of the explanatory variables on the conditional mean of the dependent variable cannot be constant and must approach zero as the dependent variable approaches the bounds. We argue that ignoring these bounds by using OLS or count-data models that ignore the upper bound can lead to erroneous conclusions due to the model's misspecification. We propose a flexible specification that accounts for the doubly-bounded nature of the dependent variable. We empirically investigate the problem and the proposed solution, and find significant differences between estimates obtained with the proposed estimator and those obtained with standard approaches.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 721.
Date of creation: 31 Oct 2012
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-ECM-2012-11-11 (Econometrics)
- NEP-INT-2012-11-11 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Baldwin Virginia Di Nino, 2006.
"Euros and zeros: The common currency effect on trade in new goods,"
IHEID Working Papers
21-2006, Economics Section, The Graduate Institute of International Studies, revised 31 Oct 2006.
- Richard E. Baldwin & Virginia Di Nino, 2006. "Euros and Zeros: The Common Currency Effect on Trade in New Goods," NBER Working Papers 12673, National Bureau of Economic Research, Inc.
- Baldwin, Richard & Di Nino, Virginia, 2006. "Euros and Zeros: The Common Currency Effect on Trade in New Goods," CEPR Discussion Papers 5973, C.E.P.R. Discussion Papers.
- Armenter, Roc & Koren, Miklós, 2010.
"A Balls-and-Bins Model of Trade,"
CEPR Discussion Papers
7783, C.E.P.R. Discussion Papers.
- Hillberry, Russell & Hummels, David, 2008.
"Trade responses to geographic frictions: A decomposition using micro-data,"
European Economic Review,
Elsevier, vol. 52(3), pages 527-550, April.
- Russell Hillberry & David Hummels, 2005. "Trade Responses to Geographic Frictions: A Decomposition Using Micro-Data," NBER Working Papers 11339, National Bureau of Economic Research, Inc.
- Dennis, Allen & Shepherd, Ben, 2007. "Trade costs, barriers to entry, and export diversification in developing countries," Policy Research Working Paper Series 4368, The World Bank.
- Hillberry, Russell H. & McDaniel, Christine A., 2002.
"A Decomposition of North American Trade Growth since NAFTA,"
15866, United States International Trade Commission, Office of Economics.
- Russell Hillberry & Christine McDaniel, 2003. "A Decomposition of North American Trade Growth since NAFTA," International Trade 0303003, EconWPA.
- Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2009.
"Alternative estimating and testing empirical strategies for fractional regression models,"
CEFAGE-UE Working Papers
2009_08, University of Evora, CEFAGE-UE (Portugal).
- Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, 02.
- Julian di Giovanni & Andrei A. Levchenko, 2009.
"Trade Openness and Volatility,"
The Review of Economics and Statistics,
MIT Press, vol. 91(3), pages 558-585, August.
- Julian di Giovanni & Andrei A. Levchenko, 2006. "Trade Openness and Volatility," Development Working Papers 219, Centro Studi Luca d\'Agliano, University of Milano.
- Andrei A. Levchenko & Julian di Giovanni, 2008. "Trade Openness and Volatility," IMF Working Papers 08/146, International Monetary Fund.
- Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, vol. 59(2), pages 195-218, February.
- Santos Silva, J.M.C. & Murteira, J.M.R., 2009.
"Estimation of default probabilities using incomplete contracts data,"
Journal of Empirical Finance,
Elsevier, vol. 16(3), pages 457-465, June.
- J. M. R. Murteira & Joao M. C. Santos Silva, 2000. "Estimation of Default Probabilities Using Incomplete Contracts Data," Econometric Society World Congress 2000 Contributed Papers 1121, Econometric Society.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Essex Economics Web Manager).
If references are entirely missing, you can add them using this form.