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Structural Gravity Estimation & Agriculture

  • Prehn, Soren
  • Brümmer, Bernhard
  • Glauben, Thomas

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 neglected - 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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Paper provided by International Agricultural Trade Research Consortium in its series 2012: New Rules of Trade?, December 2012, San Diego, California with number 142765.

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Date of creation: 2012
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Handle: RePEc:ags:iat12m:142765
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  1. 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.
  2. J.M.C. Santos Silva & Silvana Tenreyro, 2009. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Discussion Papers 666, University of Essex, Department of Economics.
  3. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," NBER Working Papers 17835, National Bureau of Economic Research, Inc.
  4. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  5. 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 University Rotterdam.
  6. Clément Bosquet & Hervé Boulhol, 2010. "Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00544129, HAL.
  7. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  8. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," NBER Working Papers 14423, National Bureau of Economic Research, Inc.
  9. 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).
  10. Kevin E. Staub & Rainer Winkelmann, 2009. "Consistent estimation of zero-inflated count models," SOI - Working Papers 0908, Socioeconomic Institute - University of Zurich, revised Aug 2011.
  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. Clément Bosquet & Hervé Boulhol, 2014. "Applying the GLM Variance Assumption to Overcome the Scale-Dependence of the Negative Binomial QGPML Estimator," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 772-784, October.
  13. 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.
  14. 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.
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