Gravity model estimation: Fixed effects vs. random intercept poisson pseudo maximum likelihood

Gravity Modell Schätzung: Fixed Effects vs.Random Intercept Poisson Pseudo Maximum Likelihood

Sören Prehn, Bernhard Brümmer and Thomas Glauben

No 148, IAMO Discussion Papers from Leibniz Institute of Agricultural Development in Transition Economies (IAMO)

Abstract: Since the work of FEENSTRA (2002), the standard ANDERSON & VAN WINCOOP (2003) Gravity Model has been estimated using a fixed effects approach. However, a fixed effects approach has a major drawback: it does not allow for the estimation of exporter- and importer-invariant variables. Thus, economically relevant variables such as exporter and importer gross domestic product are disregarded. Here, we propose a random intercept model to address this gap. This approach not only provides identical estimates to a fixed effects approach, but also allows for the estimation of exporter- and importer-invariant variables.

Keywords: Gravity Model Estimation; Poisson Pseudo Maximum Likelihood; Fixed Effects Model; Random Intercept Model (search for similar items in EconPapers)
JEL-codes: C3 F1 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ecm and nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Gravity model estimation: fixed effects vs. random intercept Poisson pseudo-maximum likelihood (2016)
Working Paper: Gravity Model Estimation: Fixed Effects vs. Random Intercept Poisson Pseudo Maximum Likelihood (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iamodp:148

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