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Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator

  • Clément Bosquet

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Hervé Boulhol

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, OCDE - Département des affaires économiques)

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.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00544129.

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Date of creation: Nov 2010
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Handle: RePEc:hal:cesptp:halshs-00544129
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00544129
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  1. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  2. 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.
  3. Lionel Fontagne & Soledad Zignago, 2007. "A Re-evaluation of the Impact of Regional Agreements on Trade Patterns," Economie Internationale, CEPII research center, issue 109, pages 31-51.
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