Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/120413
Authors: 
Bobková, Božena
Year of Publication: 
2014
Series/Report no.: 
IES Working Paper 37/2014
Abstract: 
This article questions the slope homogeneity in a gravity equation and proposes a partially heterogeneous framework for its estimation using panel data. We suggest to employ K-mean clustering to group countries according to the gravity equation variables. Further, the gravity model is estimated on these created homogeneous groups. We apply this procedure on analysis of German trade data and confirm the slope heterogeneity in the model. When we estimate the model on each cluster separately, the estimated coefficients and their standard errors vary sufficiently. Moreover, we show that the pooled estimation technique severely under- or overestimate the effect of given variables.
Subjects: 
gravity model
K-mean clustering
Germany
slope heterogeneity
JEL: 
C23
C45
F10
F14
Document Type: 
Working Paper
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