Elasticity of trade flow to trade barriers: A comparison among emerging estimation techniques

The objective of this study has been to analyze the sensitivity of trade flow to trade barriers from gravity equations, using different econometric techniques recently highlighted in the literature. Specifically, we compare a benchmark OLS fixed effects specification a la Feenstra (2002), with three emerging estimation methods: the standard Heckman correction for selection bias, to account for zero trade flow; its extension, recently proposed by Helpman et al. (2008), to control for firm heterogeneity; and, finally, the Poisson pseudo-maximum-likelihood (PPML) technique to correct for the presence of heteroskedasticity, first proposed by Santos Silva and Tenreyro (2006). Our gravity model includes trade among 211 exporter and 104 importer countries, in 18 food industry sectors.


Issue Date:
2002
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/44119
Total Pages:
6




 Record created 2017-04-01, last modified 2017-08-25

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