Gravity Estimation of the Intensive and Extensive Margins of Trade: An Alternative Procedure with Alternative Data
Helpman, Melitz and Rubinstein (2008) derive gravity equations to estimate effects of trade barriers on the intensive and extensive margins of trade. They exploit the frequency of zeros in aggregate bilateral trade data to identify effects on the extensive margin and to obtain controls for firm level heterogeneity and sample selection on the intensive margin. By using data on the number of bilaterally traded products we improve on identification and allow estimation of the extensive margin when data contain only positive trade flows. We also control for the pervasive presence of heteroscedasticity in trade data. The heterogeneity and selection biases are shown to be small and unimportant whereas the heteroscedasticity bias is large and important.
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- Santos Silva, J.M.C & Tenreyro, Silvana, 2005.
"The Log of Gravity,"
CEPR Discussion Papers
5311, C.E.P.R. Discussion Papers.
- Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
- Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
- J.M.C. Santos Silva & Silvana Tenreyro, 2008.
"Trading Partners and Trading Volumes:Implementing the Helpman-Melitz-Rubinstein Model Empirically,"
Economics Discussion Papers
662, University of Essex, Department of Economics.
- J. M. C. Santos Silva & Silvana Tenreyro, 2015. "Trading Partners and Trading Volumes: Implementing the Helpman–Melitz–Rubinstein Model Empirically," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(1), pages 93-105, 02.
- J. M. C. Santos Silva & Silvana Tenreyro, 2009. "Trading Partners and Trading Volumes: Implementing the Helpman-Melitz-Rubinstein Model Empirically," CEP Discussion Papers dp0935, Centre for Economic Performance, LSE.
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