Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator
Following Santos Silva and Tenreyro (2006), various studies have used the Poisson Pseudo-Maximum Likelihood to estimate gravity specifications of trade flows and non-count data models more generally. Some papers also report results based on the Negative Binomial estimator, which is more general and encompasses the Poisson assumption as a special case. This note shows that the Negative Binomial estimator is inappropriate when applied to a continuous dependent variable which unit choice is arbitrary, because estimates artificially depend on that choice.
|Date of creation:||2010|
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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.
- Joakim Westerlund & Fredrik Wilhelmsson, 2009. "Estimating the gravity model without gravity using panel data," Applied Economics, Taylor & Francis Journals, vol. 43(6), pages 641-649.
- Lionel Fontagne & Soledad Zignago, 2007.
"A Re-evaluation of the Impact of Regional Agreements on Trade Patterns,"
CEPII research center, issue 109, pages 31-51.
- Lionel Fontagné & Soledad Zignago, 2007. "A Re-evaluation of the impact of regional agreements on trade patterns," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00270499, HAL.
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