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Disaggregated Gravity: Benchmark Estimates and Stylized Facts from a New Database

Author

Listed:
  • Ingo Borchert

    (University of Sussex Business School)

  • Mario Larch

    (University of Bayreuth)

  • Serge Shikher

    (United States International Trade Commission)

  • Yoto Yotov

    (Drexel School of Economics)

Abstract

The objective of this paper is threefold. First, we test and validate the new International Trade and Production Database for Estimation (ITPD-E) for disaggregated gravity estimations. Second, we capitalize on the rich industry dimension of the ITPD-E to obtain benchmark gravity estimates for a wide range (170) of industries. We document differences and similarities of the impact of the standard gravity variables across the broad sectors of Agriculture, Mining and Energy, Manufacturing, and Services. Third, we use the large number of disaggregated gravity estimates to evaluate the stylized facts and best practice recommendations for gravity estimations. We compare the results obtained using Poisson Pseudo Maximum Likelihood (PPML) estimation with the results from several alternative specifications, including OLS, PPML without the zero trade flows, PPML with interval data, PPML without domestic trade, and PPML without the proper set of fixed effects to control for the multilateral resistances in gravity regressions that pool across industries. The findings from these experiments confirm and reinforce some results from the literature while challenging others.

Suggested Citation

  • Ingo Borchert & Mario Larch & Serge Shikher & Yoto Yotov, 2020. "Disaggregated Gravity: Benchmark Estimates and Stylized Facts from a New Database," School of Economics Working Paper Series 2020-8, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2020_008
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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