Structural gravity estimation & agriculture

Sören Prehn, Bernhard Brümmer and Thomas Glauben

No 1209, DARE Discussion Papers from Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE)

Abstract: Recently, discussion about the appropriate estimation of gravity trade models has started in agriculture. Here, we are going to review recent developments in the literature. It appears that fixed effects Poisson Pseudo Maximum Likelihood is not only the only consistent estimator [Santos Silva and Tenreyro, 2006] but also it already allows for a structural fit [Fally, 2012]. Fixed effects in conjunction with the adding-up property of Poisson Pseudo Maximum Likelihood - which has been so far neglegted - can be harnessed to directly deduce multilateral resistance indexes (i.e. general equilibrium effects) from reduced-form estimation. This innovation made by Fally will ease comparative statics and incidence analysis, making Poisson Pseudo Maximum Likelihood even more preferable in practice.

Keywords: Gravity Estimation; Poisson Pseudo Maximum Likelihood; Adding-up; Structural Fit (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Structural Gravity Estimation & Agriculture (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:daredp:1209

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