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Elasticity of trade flow to trade barriers: A comparison among emerging estimation techniques

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  • Olper, Alessandro
  • Raimondi, Valentina

Abstract

The objective of this study has been to analyze the sensitivity of trade flow to trade barriers from gravity equations, using different econometric techniques recently highlighted in the literature. Specifically, we compare a benchmark OLS fixed effects specification a la Feenstra (2002), with three emerging estimation methods: the standard Heckman correction for selection bias, to account for zero trade flow; its extension, recently proposed by Helpman et al. (2008), to control for firm heterogeneity; and, finally, the Poisson pseudo-maximum-likelihood (PPML) technique to correct for the presence of heteroskedasticity, first proposed by Santos Silva and Tenreyro (2006). Our gravity model includes trade among 211 exporter and 104 importer countries, in 18 food industry sectors.

Suggested Citation

  • Olper, Alessandro & Raimondi, Valentina, 2002. "Elasticity of trade flow to trade barriers: A comparison among emerging estimation techniques," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44119, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae08:44119
    DOI: 10.22004/ag.econ.44119
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    References listed on IDEAS

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    8. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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