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Comparative Advantage and Biased Gravity
| Content Provider | Scilit |
|---|---|
| Author | French, Scott |
| Copyright Year | 2017 |
| Description | Journal: SSRN Electronic Journal Gravity estimation based on sector-level trade data is generally misspecified because it ignores the role of product-level comparative advantage in shaping the effects of trade barriers on sector-level trade flows. Using a model that allows for arbitrary patterns of product-level comparative advantage, I show that sector-level trade flows follow a generalized gravity equation that contains an unobservable, bilateral component that is correlated with trade costs and omitted by standard sector-level gravity models. I propose and implement an estimator that uses product-level data to account for patterns of comparative advantage and find the bias in sector-level estimates to be significant. I also find that, when controlling for product-level comparative advantage, estimates are much more robust to distributional assumptions, suggesting that remaining biases due to heteroskedasticity and sample selection are less severe than previously thought. |
| Related Links | http://research.economics.unsw.edu.au/RePEc/papers/2017-03.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2913921 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.2913921 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2017-01-31 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Mathematical Social Sciences International Trade Heteroskedasticity |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
