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Bayesian Inference in the Gravity Model

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Author Info

  • Ranjan, Priya
  • Tobias, Justin

Abstract

his paper seeks to empirically extend the�gravity model, which has been widely used to analyze volumes of trade between pairs of countries. We generalize the basic threshold tobit model by allowing for the inclusion of country-specific effects into the analysis and also show how one can explore the relationship between trade volumes and a given covariate via a non-parametric approach. We use our derived methodology to investigate the impact of a particular aspect of institutions—the enforcement of contracts—on bilateral trade. We find that contract enforcement matters in predicting trade volumes for all types of goods, that it matters most for the trade of differentiated goods, and that the relationship between contract enforcement and trade in our threshold tobit exhibits some nonlinearities.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12721.

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Date of creation: 15 Feb 2007
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Publication status: Published in Journal of Applied Econometrics, June/July 2007, vol. 22 no. 4, pp. 817-838
Handle: RePEc:isu:genres:12721

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Christian Volpe Martincus & Jerónimo Carballo, 2010. "Export Promotion Activities in Developing Countries: What kind of Trade Do They Promote?," IDB Publications 36761, Inter-American Development Bank.
  2. Millimet, Daniel & Henderson, Daniel, 2006. "Is Gravity Linear?," Departmental Working Papers 0517, Southern Methodist University, Department of Economics.
  3. Corcos, G. & Irac, D. & Mion, G. & Verdier, T., 2012. "The determinants of intrafirm trade: Evidence from French firms," Working papers 362, Banque de France.
  4. Eaton, Derek J.F., 2009. "Trade and Intellectual Property Rights in the Agricultural Seed Sector," 2009 Conference, August 16-22, 2009, Beijing, China 51782, International Association of Agricultural Economists.
  5. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2008. "The Determinants of Intra-Firm Trade," Development Working Papers 267, Centro Studi Luca d\'Agliano, University of Milano.
  6. Xiong, Bo & Chen, Sixia, 2012. "Estimating Gravity Equation Models in the Presence of Sample Selection and Heteroskedasticity," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124530, Agricultural and Applied Economics Association.
  7. Oxana Babecka Kucharcukova & Jan Babecky & Martin Raiser, 2010. "A Gravity Approach to Modelling International Trade in South-Eastern Europe and the Commonwealth of Independent States: The Role of Geography, Policy and Institutions," Working Papers 2010/04, Czech National Bank, Research Department.

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