Open AccessGravity Equation and Trade Agreements: A Different Econometric Approach
Author(s) -
María Luisa Recalde,
Marcelo Florensa,
Iván Iturralde
Publication year - 2008
Publication title -
revista de economía y estadística/revista de economía y estadística
Language(s) - English
Resource type - Journals
eISSN - 2451-7321
pISSN - 0034-8066
DOI - 10.55444/2451.7321.2008.v46.n2.3853
Subject(s) - tobit model , heteroscedasticity , estimator , econometrics , economics , gravity model of trade , poisson distribution , maximum likelihood , mathematics , statistics , international trade
This paper is aimed at multiplicatively estimating the parameters of the gravity equation by using the Poisson Pseudo-Maximum-Likelihood (PPML) estimator, and taking heteroskedasticity into account at the same time. Besides, in order to compare the results, the model will be estimated trough OLS and Tobit, and the precision of the different estimators will be assessed by a set of specification tests. Results indicate that the effects of Preferential Trade Agreements are very sensitive to the method chosen to estimate the gravity model and the results obtained under PPML are the most reliable.