Gravity models, PPML estimation and the bias of the robust standard errors

By Michael Pfaffermayr. Applied Economics Letters, 2019

59 citations recorded by the source corpus.

ABSTRACT In gravity models with exporter and importer dummies, the robust standard errors of the slope parameters tend to be severely downward biased when estimated by PPML. The coverage rate of confidence intervals of the estimated slope parameters may thus be much too small in cross-sections of the size typically used in empirical research.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/3f101a3e25017e23da9c6adab56038ee524be70e

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Thomas Zylkin
2. Jakob Schwab
3. Axel Berger
4. J. Morin
5. Martin P. Weidner
6. Clara Brandi
7. Iv'an Fern'andez-Val
8. Yoto V. Yotov

In Management Science and Operations Research

1. Martin P. Weidner
2. Thomas Zylkin

Citations in the corpus

• Do environmental provisions in trade agreements make exports from developing countries greener? (2020, background): “Furthermore, PPML has started being under some discussion in the literature recently (see Pfaffermayr, 2019).”
• Bias and consistency in three-way gravity models (2019, background): “We should therefore be concerned that asymptotic confidence intervals for β̂ may exhibit inadequate coverage even in moderately large samples, similar to what has been found for the two-way FEPPML model in recent simulation studies by Egger and Staub (2015), Jochmans (2016), and Pfaffermayr (2019).”