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Aggregravity: Estimating Gravity Models from Aggregate Data

Author

Listed:
  • Harald Badinger

    (Department of Economics, Vienna University of Economics and Business)

  • Jesus Crespo Cuaresma

    (Department of Economics, Vienna University of Economics and Business)

Abstract
This paper considers alternative methods to estimate econometric models based on bilateral data when only aggregate information on the dependent variable is available. Such methods can be used to obtain an indication of the sign and magnitude of bilateral model parameters and, more importantly, to decompose aggregate into bilateral data, which can then be used as proxy variables in further empirical analysis. We perform a Monte Carlo study and carry out a simple real world application using intra-EU trade and capital flows, showing that the methods considered work reasonably well and are worthwhile being considered in the absence of bilateral data.

Suggested Citation

  • Harald Badinger & Jesus Crespo Cuaresma, 2014. "Aggregravity: Estimating Gravity Models from Aggregate Data," Department of Economics Working Papers wuwp183, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp183
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    References listed on IDEAS

    as
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    6. Lane, Philip & Milesi-Ferretti, Gian Maria, "undated". "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
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    More about this item

    Keywords

    Aggregation; gravity equations;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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