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Gravity models of intra‐EU trade: application of the CCEP‐HT estimation in heterogeneous panels with unobserved common time‐specific factors
Laura Serlenga,Yongcheol Shin +1 more
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TLDR
In this article, a generalized Hausman-Taylor estimation method was proposed to estimate the gravity equation of bilateral trade flows among 15 European countries over 1960-2001, and the results showed that the proposed approach provided more sensible results than the conventional approach based on fixed time dummies.Abstract:
We follow recent developments of panel data studies and allow for the existence of both observed and unobserved common factors where their individual responses are allowed to be heterogeneous. We then develop a generalized Hausman–Taylor estimation methodology, and apply our proposed estimation technique to an analysis of the gravity equation of bilateral trade flows among 15 European countries over 1960–2001. Empirical results demonstrate that our proposed approach provides more sensible results than the conventional approach based on fixed time dummies. These findings may highlight the importance of allowing for a certain degree of cross-section dependence through unobserved heterogeneous time-specific effects; the resulting estimates would otherwise be severely biased. Copyright © 2007 John Wiley & Sons, Ltd.read more
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Panel data analysis—advantages and challenges
Cheng Hsiao,Cheng Hsiao +1 more
TL;DR: The proliferation of panel data studies is explained in terms of data availability, the more heightened capacity for modeling the complexity of human behavior than a single cross-section or time series data can possibly allow, and challenging methodology.
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Do spillovers matter when estimating private returns to r&d?
TL;DR: The authors investigate whether ignoring spillovers leads to bias in the estimated private returns to R&D, and compare results from a common factor framework, which accounts for spillovers and other unobserved shocks, to those from a standard Griliches approach.
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Currency unions and trade: A post-EMU reassessment
Reuven Glick,Andrew K. Rose +1 more
TL;DR: The authors used a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU), and their preferred methodology indicates that EMU has boosted exports by around 50%.
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The language effect in international trade: A meta-analysis
Peter Egger,Andrea Lassmann +1 more
TL;DR: The authors provided a meta-analysis based on 701 language effects collected from 81 academic articles and found that on average, a common (official or spoken) language increases trade flows directly by 44%.
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Rose effect and the Euro: The magic is gone
TL;DR: The authors presented an updated meta-analysis of the effect of currency unions on trade, focusing on the Euro area, using meta-regression methods such as funnel asymmetry test, evidence for strong publication bias is found.
References
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Specification Tests in Econometrics
TL;DR: In this article, the null hypothesis of no misspecification was used to show that an asymptotically efficient estimator must have zero covariance with its difference from a consistent but asymptonically inefficient estimator, and specification tests for a number of model specifications in econometrics.
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Technology, Geography, and Trade
Jonathan Eaton,Samuel Kortum +1 more
TL;DR: This article developed a Ricardian trade model that incorporates realistic geographic features into general equilibrium and delivered simple structural equations for bilateral trade with parameters relating to absolute advantage, comparative advantage, and geographic barriers.
Journal ArticleDOI
Increasing returns, monopolistic competition, and international trade
TL;DR: The authors developed a simple, general equilibrium model of non-comparative advantage trade and showed that trade and gains from trade will occur, even between countries with identical tastes, technology, and factor endowments.
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Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure
TL;DR: In this article, the authors proposed a new approach to estimation and inference in panel data models with a multifactor error structure where the unobserved common factors are correlated with exogenously given individual-specific regressors, and the factor loadings differ over the cross-section units.