IDEAS home Printed from https://ideas.repec.org/a/cii/cepiie/2019-q1-157-4.html
   My bibliography  Save this article

Iterative solutions for structural gravity models in panels

Author

Listed:
  • Aurélien Poissonnier

Abstract

The estimation of structural gravity models for bilateral trade flows faces methodological difficulties. These difficulties are in particular due to the multilateral resistance terms (MRT) which account for the general equilibrium constraints of global trade. In the present paper, I show that the MRT are unique (to a harmless scale factor) and one can compute them iteratively. Based on a parallel between the MRT and the biproportional projection of matrices in the Input-Output literature, I give new insights on the econometric strategy to estimate structural gravity equations. I extend to panels the iterative method proposed by Head and Mayer (2014), Gravity equations: Workhorse, toolkit, and cookbook, in Handbook of International Economics. This double loop procedure nests the current standard in the literature (the Poisson Pseudo Maximum Likelihood –PPML-with dummies). I exemplify its possibilities on real data. PPML results appear not robust to a change of estimator.

Suggested Citation

  • Aurélien Poissonnier, 2019. "Iterative solutions for structural gravity models in panels," International Economics, CEPII research center, issue 157, pages 55-67.
    • Handle: RePEc:cii:cepiie:2019-q1-157-4
    as

    Download full text from publisher

    File URL: https://www.sciencedirect.com/science/article/pii/S2110701717300434
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kox, Henk L.M., 2022. "A micro-macro model of foreign direct investment: Knowledge-based gravity forces, self-selection and third-country effects," EconStor Preprints 266494, ZBW - Leibniz Information Centre for Economics.
    2. Berislav ZMUK, 2021. "Investigating the impact of GDP and distance variables in the gravity model using sign and rank tests," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12, pages 5-30, June.
    3. Getachew Magnar Kitila & Fuzhong Chen, 2021. "Multilateral Trade Resistance, International Competitiveness and African International Exports: A Network Perspective," International Journal of Science and Business, IJSAB International, vol. 5(10), pages 111-126.
    4. Michael Pfaffermayr, 2020. "Trade creation and trade diversion of economic integration agreements revisited: a constrained panel pseudo-maximum likelihood approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 985-1024, November.
    5. Kox, Henk L.M., 2022. "Explaining foreign direct investment patterns: a testable micro-macro gravity model for FDI," MPRA Paper 115273, University Library of Munich, Germany.
    6. Pfaffermayr, Michael, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, Elsevier, vol. 161(C), pages 188-198.

    More about this item

    Keywords

    Structural gravity model; Panel data; Multilateral resistance; Biproportional projection method;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cii:cepiie:2019-q1-157-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cepiifr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.