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Joakim Westerlund. Photo.

Joakim Westerlund

Professor, Programme director – Master of Data Analytics and Business Economics

Joakim Westerlund. Photo.

Estimating the gravity model without gravity using panel data

Author

  • Joakim Westerlund
  • Fredrik Wilhelmsson

Summary, in English

This article examines the effects of zero trade on the estimation of the gravity model using both simulated and real data with a panel structure, which is different from the more conventional cross-sectional structure. We begin by showing that the usual log-linear estimation method can result in highly deceptive inference when some observations are zero. As an alternative approach, we suggest using the poisson fixed effects estimator. This approach eliminates the problems of zero trade, controls for heterogeneity across countries, and is shown to perform well in small samples.

Department/s

  • Department of Economics
  • AgriFood Economics Centre, Lund University School of Economics and Management

Publishing year

2011

Language

English

Pages

641-649

Publication/Series

Applied Economics

Volume

43

Issue

6

Document type

Journal article

Publisher

Routledge

Topic

  • Economics and Business

Keywords

  • panel data
  • trade
  • Poisson regression model
  • Gravity model of trade

Status

Published

ISBN/ISSN/Other

  • ISSN: 1466-4283