Constrained Poisson pseudo maximum likelihood estimation of structural gravity models
Economie Internationale, 2020, 161, pp.188-198
This paper reconsiders the estimation of structural gravity models. It introduces a constrained, projection-based Poisson
pseudo maximum likelihood estimation procedure (constrained PPML) that exploits the equilibrium conditions introduced by Anderson
and Van Wincoop (2003) for estimation and inference. The constrained PPML estimator avoids the estimation of the large number
of exporter and importer fixed effects, and provides more reliable inference than the unconstrained PPML estimator. Moreover,
based on the delta method the paper drives confidence intervals of counterfactual changes. Monte Carlo simulations yield encouraging
results on the performance of the constrained PPML estimator.
Research group:Industrial, Innovation and International Economics