The log of gravity

• 成果类型: Article
• 署名作者: Silva, J. M. C. Santos; Tenreyro, Silvana
• 署名单位: Universidade de Lisboa; University of London; London School Economics & Political Science; University of London; London School Economics & Political Science
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest.88.4.641
• 发表日期: 2006-11
• 页码: 641-658
• 关键词: count data models; least-squares; TRADE; heteroskedasticity

摘要

Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: under heteroskedasticity, the parameters of log-linearized models estimated by OLS lead to biased estimates of the true elasticities. We explain why this problem arises and propose an appropriate estimator. Our criticism of conventional practices and the proposed solution extend to a broad range of applications where log-linearized equations are estimated. We develop the argument using one particular illustration, the gravity equation for trade. We find significant differences between estimates obtained with the proposed estimator and those obtained with the traditional method.