The Poisson quasi-maximum likelihood estimator: A solution to the “adding up” problem in gravity models
AbstractThis paper shows that the Poisson quasi-maximum likelihood estimator applied to the gravity model produces estimates in which, summing across all partners, actual and estimated total trade flows are identical. Other methods such as OLS do not have this desirable property. Indeed, Poisson is the only quasi-maximum likelihood estimator that preserves total trade flows. This result is an additional reason for preferring Poisson as a workhorse gravity model estimator.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 34334.
Date of creation: 25 Oct 2011
Date of revision:
International Trade; Gravity Model; Poisson; Quasi-Maximum Likelihood Estimator;
Other versions of this item:
- Jean-Fran�ois Arvis & Ben Shepherd, 2013. "The Poisson quasi-maximum likelihood estimator: a solution to the ‘adding up’ problem in gravity models," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 515-519, April.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- F10 - International Economics - - Trade - - - General
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