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Confidence intervals for the trade cost parameters of cross-section gravity models

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  • Pfaffermayr, Michael

Abstract

Confidence intervals using robust PPML-standard errors are too small in cross-section gravity models. Monte Carlo simulations indicate approximately correct coverage rates of jackknife and percentile bootstrap confidence intervals. Those of constrained PPML estimates are reliable, if trade costs are non-stochastic.

Suggested Citation

  • Pfaffermayr, Michael, 2021. "Confidence intervals for the trade cost parameters of cross-section gravity models," Economics Letters, Elsevier, vol. 201(C).
    • Handle: RePEc:eee:ecolet:v:201:y:2021:i:c:s0165176521000641
    DOI: 10.1016/j.econlet.2021.109787
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    References listed on IDEAS

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    1. Guido W. Imbens & Michal Kolesár, 2016. "Robust Standard Errors in Small Samples: Some Practical Advice," The Review of Economics and Statistics, MIT Press, vol. 98(4), pages 701-712, October.
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    6. Harald Oberhofer & Michael Pfaffermayr, 2021. "Estimating the trade and welfare effects of Brexit: A panel data structural gravity model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 338-375, February.
    7. Michael Pfaffermayr, 2019. "Gravity models, PPML estimation and the bias of the robust standard errors," Applied Economics Letters, Taylor & Francis Journals, vol. 26(18), pages 1467-1471, October.
    8. McKinley L. Blackburn, 2020. "Bias in Small-Sample Inference With Count-Data Models," The American Statistician, Taylor & Francis Journals, vol. 74(3), pages 267-273, July.
    9. Michael Pfaffermayr, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, CEPII research center, issue 161, pages 188-198.
    10. 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.
    11. David Roodman & James G. MacKinnon & Morten Ørregaard Nielsen & Matthew D. Webb, 2019. "Fast and wild: Bootstrap inference in Stata using boottest," Stata Journal, StataCorp LP, vol. 19(1), pages 4-60, March.
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    Cited by:

    1. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
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    3. Meina Zhou & Junying Wang & Hao Ji, 2023. "Virtual Land and Water Flows and Driving Factors Related to Livestock Products Trade in China," Land, MDPI, vol. 12(8), pages 1-20, July.
    4. Julia Spornberger, 2022. "EU integration and structural gravity: A comprehensive quantification of the border effect on trade," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 915-938, September.

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    More about this item

    Keywords

    Poisson pseudo maximum likelihood estimation; Confidence interval; Heteroskedasticity-robust inference; Gravity equation; Bootstrap;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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