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Trade, gravity and aggregation
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Breinlich, Holger, Novy, Dennis and Santos Silva , J. M. C. (2023) Trade, gravity and aggregation. Review of Economics and Statistics . doi:10.1162/rest_a_01234 ISSN 0034-6535. (In Press)
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Official URL: https://doi.org/10.1162/rest_a_01234
Abstract
Gravity equations are an important tool in empirical international trade research. We study to what extent sector-level parameters can be recovered from aggregate gravity equations estimated via Poisson pseudo maximum likelihood. We show that in the leading case where trade cost regressors do not vary at the sector level, estimates obtained with aggregate data have a clear interpretation as a weighted average of sectoral elasticities. Otherwise the estimates are biased but researchers may possibly infer the direction of the bias. We illustrate our results by revisiting Baier and Bergstrand's (2007) influential study of the effects of free trade agreements.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HF Commerce | ||||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||||
Library of Congress Subject Headings (LCSH): | Free trade, International trade , Gravity model of international trade, International trade -- Econometric models | ||||||||
Journal or Publication Title: | Review of Economics and Statistics | ||||||||
Publisher: | MIT Press | ||||||||
ISSN: | 0034-6535 | ||||||||
Official Date: | 2023 | ||||||||
Dates: |
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Number of Pages: | 29 | ||||||||
DOI: | 10.1162/rest_a_01234 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | In Press | ||||||||
Reuse Statement (publisher, data, author rights): | This is the author's version of the article accepted for publication by Review of Economics and Statistics on 3/6/2022 | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Copyright Holders: | The President and Fellows of Harvard College and the Massachusetts Institute of Technology | ||||||||
Date of first compliant deposit: | 15 June 2022 | ||||||||
Date of first compliant Open Access: | 15 August 2022 | ||||||||
RIOXX Funder/Project Grant: |
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