Structural Gravity Estimation and Agriculture Report as inadecuate

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Recently, discussion about the appropriate estimation of gravity trade modelshas started in agriculture. Here, we are going to review recent developments inthe literature. It appears that fixed effects Poisson Pseudo Maximum Likelihood isnot only the only consistent estimator [Santos Silva and Tenreyro, 2006] but also italready allows for a structural fit [Fally, 2012]. Fixed effects in conjunction with theadding-up property of Poisson Pseudo Maximum Likelihood - which has been so farneglected - can be harnessed to directly deduce multilateral resistance indexes (i.e.general equilibrium effects) from reduced-form estimation. This innovation made byFally will ease comparative statics and incidence analysis, making Poisson PseudoMaximum Likelihood even more preferable in practice.

Subject(s): Agricultural and Food Policy

Research Methods/ Statistical Methods

Issue Date: 2012

Publication Type: Conference Paper/ Presentation

PURL Identifier:

Total Pages: 7

Record appears in: International Agricultural Trade Research Consortium > 2012: New Rules of Trade? December 2012, San Diego, California

Author: Prehn, Soren ; Brümmer, Bernhard ; Glauben, Thomas



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