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Estimates of Trade Costs using Gravity Equation in Mixed Effects Model

Author

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  • Eyup Dogan

Abstract

By using a log-linear Taylor-series expansion to linearize the multilateral resistance terms, this study aims to estimate the theory-based gravity equation in mixed effects model to obtain not only unbiased and consistent but also efficient coefficient estimates of trade cost variables. We show that coefficient estimates of trade cost variables estimated using mixed effects model are close to those found by the existing literature; however, only those in this paper are efficient as a result of accounting for unobserved country heterogeneity and approximation errors.

Suggested Citation

  • Eyup Dogan, 2016. "Estimates of Trade Costs using Gravity Equation in Mixed Effects Model," Applied Economics and Finance, Redfame publishing, vol. 3(2), pages 39-44, May.
    • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:2:p:39-44
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    Cited by:

    1. Shaker, Saber Adly, 2017. "أثر النفقات اللوجستية على نفاذ الصادرات المصرية إلى دول حوض النيل [The Impact of Logistics Costs on Access of Egyptian Exports to Nile Basin Countries]," MPRA Paper 89117, University Library of Munich, Germany, revised Dec 2016.

    More about this item

    Keywords

    Trade Costs; Gravity Equation; Mixed Effects Model;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F10 - International Economics - - Trade - - - General

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