Estimating Trade Policy Effects with Structural Gravity

By R. Piermartini, Yoto V. Yotov. Social Science Research Network, 2016

137 citations recorded by the source corpus.

The objective of this manuscript is to serve as a practical guide for estimations with the structural gravity model. After a brief review of the theoretical foundations, we summarize the main challenges with gravity estimations and we review the solutions to address those challenges. Then, we integrate the latest developments in the empirical gravity literature and we offer six recommendations to obtain reliable partial equilibrium estimates of the effects of bilateral and non-discriminatory trade policies within the same comprehensive, and theoretically-consistent econometric specification. Our recommendations apply equally to analyses with aggregate and disaggregated data. Interpretation, consistent aggregation methods, and data challenges and sources for gravity estimations are discussed as well. Empirical exercises demonstrate the usefulness, validity, and applicability of our methods.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/bf377a963b82e5e7cb4f6a65b4daf349225db435

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Citations in the corpus

Deep Trade Agreements and Global Value Chains (2018, unknown): “The set of fixed effects that are included in the structural gravity estimation partially deals with both sources of endogeneity (Baier and Bergstrand 2007; Piermartini and Yotov 2016).”
On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration (2019, background): “Piermartini & Yotov (2016) offer broader discussion of the econometric challenges associated with gravity estimation as well as recommended best practices.”
Trade creation and trade diversion in deep agreements (2017, methodology): “35 See Chapter 5 in Baldwin and Wyplosz (2012).”