Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/64610 
Year of Publication: 
2012
Series/Report no.: 
Diskussionsbeitrag No. 1209
Publisher: 
Georg-August-Universität Göttingen, Department für Agrarökonomie und Rurale Entwicklung (DARE), Göttingen
Abstract: 
Recently, discussion about the appropriate estimation of gravity trade models has started in agriculture. Here, we are going to review recent developments in the literature. It appears that fixed effects Poisson Pseudo Maximum Likelihood is not only the only consistent estimator [Santos Silva and Tenreyro, 2006] but also it already allows for a structural fit [Fally, 2012]. Fixed effects in conjunction with the adding-up property of Poisson Pseudo Maximum Likelihood - which has been so far neglegted - can be harnessed to directly deduce multilateral resistance indexes (i.e. general equilibrium effects) from reduced-form estimation. This innovation made by Fally will ease comparative statics and incidence analysis, making Poisson Pseudo Maximum Likelihood even more preferable in practice.
Subjects: 
Gravity Estimation
Poisson Pseudo Maximum Likelihood
Adding-up
Structural Fit
Document Type: 
Working Paper

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