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:||Nov 2010|
|Date of revision:|
|Publication status:||Published in Documents de travail du Centre d'Economie de la Sorbonne 2010.92 - ISSN : 1955-611X. 2010|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00544129|
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- 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.
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- J. M. C. Santos Silva & Silvana Tenreyro, 2006.
"The Log of Gravity,"
The Review of Economics and Statistics,
MIT Press, vol. 88(4), pages 641-658, November.
- 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.
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- 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.
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