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Treatment of endogenous monadic variables in gravity equations

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  • Bayar, Omer

Abstract

In the presence of country fixed effects, monadic variables are not identified in the traditional gravity equation. The paper uses a hybrid two-stage treatment model to overcome the identification problem. The model also accommodates endogeneity in monadic variables. An application to the trade impact of the Olympic Games is presented. Results highlight the empirical significance of endogeneity left untreated in the gravity equation.

Suggested Citation

  • Bayar, Omer, 2017. "Treatment of endogenous monadic variables in gravity equations," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 21-28.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:21-28
    DOI: 10.1016/j.iref.2017.09.003
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    More about this item

    Keywords

    Monadic variables; Two-stage model; Treatment; Olympics;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • Z2 - Other Special Topics - - Sports Economics

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