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Structural gravity estimation & agriculture

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  • Prehn, Sören
  • Brümmer, Bernhard
  • Glauben, Thomas
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    Abstract

    Recently, discussion about the appropriate estimation of gravity trade models has started in agriculture. Here, we are going to review recent developments in the literature. It appears that fixed effects Poisson Pseudo Maximum Likelihood is not only the only consistent estimator [Santos Silva and Tenreyro, 2006] but also it already allows for a structural fit [Fally, 2012]. Fixed effects in conjunction with the adding-up property of Poisson Pseudo Maximum Likelihood - which has been so far neglegted - can be harnessed to directly deduce multilateral resistance indexes (i.e. general equilibrium effects) from reduced-form estimation. This innovation made by Fally will ease comparative statics and incidence analysis, making Poisson Pseudo Maximum Likelihood even more preferable in practice. --

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    Bibliographic Info

    Paper provided by Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE) in its series DARE Discussion Papers with number 1209.

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    Date of creation: 2012
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    Handle: RePEc:zbw:daredp:1209

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    Keywords: Gravity Estimation; Poisson Pseudo Maximum Likelihood; Adding-up; Structural Fit;

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    1. Burger, M.J. & van Oort, F.G. & Linders, G.J.M., 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-Inflated Estimation," ERIM Report Series Research in Management ERS-2009-003-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    2. Zahoor Ul Haq & Karl Meilke & John Cranfield, 2013. "Selection bias in a gravity model of agrifood trade," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 40(2), pages 331-360, March.
    3. Kevin E. Staub & Rainer Winkelmann, 2013. "Consistent Estimation Of Zero‐Inflated Count Models," Health Economics, John Wiley & Sons, Ltd., vol. 22(6), pages 673-686, 06.
    4. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-86, December.
    5. Santos Silva, J.M.C. & Tenreyro, Silvana, 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Letters, Elsevier, vol. 112(2), pages 220-222, August.
    6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    7. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
    8. Clément Bosquet & Hervé Boulhol, 2010. "Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator," Documents de travail du Centre d'Economie de la Sorbonne 10092, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    9. Peter H. Egger & Mario Larch, 2012. "Estimating Consistent Border Effects in Gravity Models with Multilateral Resistance," The World Economy, Wiley Blackwell, vol. 35(9), pages 1121-1125, 09.
    10. Busse, Stefan & Brümmer, Bernard & Ihle, Rico, 2010. "Interdependencies between fossil fuel and renewable energy markets: the German biodiesel market," DARE Discussion Papers 1010, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    11. Philippidis, George & Resano-Ezcaray, Helena & Sanjuan-Lopez, Ana Isabel, 2011. "Capturing zero trade values in gravity equations of trade: A disaggregated sectoral analysis," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114760, European Association of Agricultural Economists.
    12. Anderson, James & Milot, Catherine & Yotov, Yoto, 2012. "How Much Does Geography Deflect Services Trade?," School of Economics Working Paper Series 2012-5, LeBow College of Business, Drexel University.
    13. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," NBER Working Papers 17835, National Bureau of Economic Research, Inc.
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