Structural gravity with dummies only: Constrained ANOVA-type estimation of gravity models

• 成果类型: Article
• 署名作者: Egger, Peter H.; Nigai, Sergey
• 署名单位: Swiss Federal Institutes of Technology Domain; ETH Zurich; Leibniz Association; Ifo Institut
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2015.05.004
• 发表日期: 2015
• 页码: 86-99
• 关键词: Gravity models; Structural general-equilibrium models; Fixed effects estimation

摘要

The measurement of trade costs and their effects on outcome is at the heart of a large quantitative literature in international economics. The majority of the recent significant contributions on the matter assumes that trade is log-linear in exporter-specific factors, importer-specific factors, and log trade costs that are additively composed of a parameterized part and a residual part. We demonstrate that, under standard assumptions in the literature, the magnitude of unobservable, residual trade costs is large, and that their ignorance leads to a bias of the importance of observable trade-cost measures as well as of country-specific variables that are either solved implicitly through structural estimation or estimated explicitly as fixed effects. The reason is that, due to general-equilibrium linkages, some country-specific variables are endogenous to residual trade costs, regardless of whether they are captured by iteratively-solved structural terms or by country(-time) fixed effects. As a result, quantifications of effects of trade costs and comparative static results are also biased. Apart from diagnosing this problem, the paper provides remedies for it by proposing theory-consistent approaches including a two-step procedure that permits identifying partial effects of observable gravity variables on total trade costs and trade flows which do not suffer from the unobserved-trade-cost bias. (C) 2015 Elsevier B.V. All rights reserved.