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THE GRAVITY MODEL: AN ILLUSTRATION OF STRUCTURAL ESTIMATION AS CALIBRATION
Author(s) -
BALISTRERI EDWARD J.,
HILLBERRY RUSSELL H.
Publication year - 2008
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00093.x
Subject(s) - calibration , replicate , economics , econometrics , estimation , point (geometry) , gravity model of trade , process (computing) , structural estimation , econometric model , mathematical economics , computer science , macroeconomics , mathematics , statistics , geometry , management , operating system
Dawkins, Srinivasan, and Whalley (“Calibration,” Handbook of Econometrics, 2001) propose that estimation is calibration. We illustrate their point by examining a leading econometric application in the study of international and interregional trade by Anderson and van Wincoop (“Gravity with Gravitas: A Solution to the Border Puzzle,” American Economic Review, 2003). We replicate the econometric process and show it to be a calibration of a general equilibrium model. Our approach offers unique insights into structural estimation, and we highlight the importance of traditional calibration considerations when one uses econometric techniques to calibrate a model for comparative policy analysis. ( JEL F10, C13, C60)