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Aggregravity: estimating gravity models from aggregate data

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  • Harald Badinger
  • Jesus Crespo Cuaresma

Abstract

This article considers alternative methods to estimate econometric models based on bilateral data when only aggregate information on the dependent variable is available. Such methods can be used to obtain an indication of the sign and magnitude of bilateral model parameters and, more importantly, to decompose aggregate into bilateral data, which can then be used as proxy variables in further empirical analyses. We perform a Monte Carlo study and carry out a simple real world application using intra-EU trade and capital flows, showing that the methods considered work reasonably well and are worthwhile being considered in the absence of bilateral data.

Suggested Citation

  • Harald Badinger & Jesus Crespo Cuaresma, 2015. "Aggregravity: estimating gravity models from aggregate data," Applied Economics, Taylor & Francis Journals, vol. 47(20), pages 2119-2126, April.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:20:p:2119-2126
    DOI: 10.1080/00036846.2014.1002903
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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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