Regime Selection as an Alternative to the Grubel-Lloyd Index
Abstract This paper contends that the regime selection probability can provide an â€œempirically justifiableâ€ alternative to the GL index as a measurement of intra-industry trade. The regime selection probability is an average of sample selection probability that each trade flow data comes from inter-industry trade (or equivalently from intra-industry trade). It measures the extent to which a given set of observations is explained by the inter-industry trade regime (or the intra-industry trade regime). The Heckman two-step procedure is used: a probit model is fitted first to a separation indicator, and then the estimated parameters are incorporated into the unconditional probability equation for the second stage estimation. The sample selection model requires an auxiliary separation indicator to partition the sample, so that each of its elements may match up with either comparative advantage or product differentiation with scale economies. As it is a selection criterion based on â€œempirical regularitiesâ€ for separating intra-industry trade from inter-industry trade, the regime selection probability can improve upon the GL index as a relevant indicator of intra-industry trade. It can also be used to infer a transition in trade patterns, since a change in its value indicates how a shifting of explanatory power from comparative advantage to product differentiation takes place.
|Date of creation:||11 Aug 2004|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ecm:feam04:491. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.