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Estimating the extensive margin of trade

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  • Santos Silva, J.M.C.
  • Tenreyro, Silvana
  • Wei, Kehai

Abstract

Understanding and quantifying the determinants of the number of sectors or firms exporting in a given country is of relevance for the assessment of trade policies. Estimation of models for the number of exporting sectors, however, poses a challenge because the dependent variable has both a lower and an upper bound, implying that the partial effects of the explanatory variables on the conditional mean of the dependent variable cannot be constant. We argue that ignoring these bounds can lead to erroneous conclusions and propose a flexible specification that accounts for the doubly-bounded nature of the dependent variable. We empirically investigate the problem and the proposed solution, finding significant differences between estimates obtained with the proposed estimator and those obtained with standard approaches.

Suggested Citation

  • Santos Silva, J.M.C. & Tenreyro, Silvana & Wei, Kehai, 2014. "Estimating the extensive margin of trade," Journal of International Economics, Elsevier, vol. 93(1), pages 67-75.
  • Handle: RePEc:eee:inecon:v:93:y:2014:i:1:p:67-75
    DOI: 10.1016/j.jinteco.2013.12.001
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    Cited by:

    1. Campi, Mercedes & Dueñas, Marco, 2016. "Intellectual Property Rights and International Trade of Agricultural Products," World Development, Elsevier, vol. 80(C), pages 1-18.
    2. Egger, Peter H. & Nigai, Sergey, 2015. "Structural gravity with dummies only: Constrained ANOVA-type estimation of gravity models," Journal of International Economics, Elsevier, vol. 97(1), pages 86-99.
    3. Handley, Kyle, 2014. "Exporting under trade policy uncertainty: Theory and evidence," Journal of International Economics, Elsevier, vol. 94(1), pages 50-66.
    4. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2016. "The distance effects on the intensive and extensive margins of trade over time," Empirical Economics, Springer, vol. 50(2), pages 253-278, March.
    5. Alessandro Barattieri & Ingo Borchert & Aaditya Mattoo, 2016. "Cross-border mergers and acquisitions in services: The role of policy and industrial structure," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1470-1501, November.
    6. Rafael Cezar, 2015. "The gravity of financial development," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(5), pages 696-723, August.
    7. Patrick Alexander, 2016. "Producer Heterogeneity, Value-Added, and International Trade," Staff Working Papers 16-54, Bank of Canada.
    8. Jean-François Maystadt & Valerie Mueller & Ashwini Sebastian, 2016. "Environmental Migration and Labor Markets in Nepal," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 417-452.
    9. Anna Andersson, 2016. "Export Performance and Access to Intermediate Inputs: The Case of Rules of Origin Liberalisation," The World Economy, Wiley Blackwell, vol. 39(8), pages 1048-1079, August.
    10. Fensore, Irene & Legge, Stefan & Schmid, Lukas, 2017. "Human Barriers to International Trade," Economics Working Paper Series 1712, University of St. Gallen, School of Economics and Political Science.
    11. Raimondi, Valentina & Falco, Chiara & Curzi, Daniele & Olper, Alessandro, 2016. "Estimating the trade effects of the EU food quality policy," 149th Seminar, October 27-28, 2016, Rennes, France 244795, European Association of Agricultural Economists.
    12. Huberman, Michael & Meissner, Christopher M. & Oosterlinck, Kim, 2017. "Technology and Geography in the Second Industrial Revolution: New Evidence from the Margins of Trade," The Journal of Economic History, Cambridge University Press, vol. 77(01), pages 39-89, March.
    13. Egger, Peter & Nigai, Sergey, 2015. "Structural Gravity with Dummies Only," CEPR Discussion Papers 10427, C.E.P.R. Discussion Papers.
    14. Fadaeenejad, M. & Radzi, M.A.M. & AbKadir, M.Z.A. & Hizam, H., 2014. "Assessment of hybrid renewable power sources for rural electrification in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 299-305.
    15. Ali Palali & Bas Straathof & Rinske Windig, 2017. "The effect of geographical distance on online transactions: Evidence from the Netherlands," CPB Discussion Paper 362, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Machado, José A.F. & Santos Silva, J.M.C. & Wei, Kehai, 2016. "Quantiles, corners, and the extensive margin of trade," European Economic Review, Elsevier, vol. 89(C), pages 73-84.
    17. repec:gam:jsusta:v:8:y:2015:i:1:p:13:d:61509 is not listed on IDEAS
    18. Augusto de la Torre & Daniel Lederman & Alain Ize & Federico R. Bennett & Martin Sasson, "undated". "The Big Switch in Latin America," World Bank Other Operational Studies 25098, The World Bank.

    More about this item

    Keywords

    Bounded data; Estimation of trade models; Number of sectors;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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