I have a very simple query about scaled OLS/OLS. I am estimating the following double-log gravity model:
ivreg2 limp lgdpm lcapm lgdpx lcapx ldist lareap landl island border comlang comcol colony iicor (lchx= lchdist lchgdp), gmm robust cluster(pid)
where the dependent variable ,limp, is the log of imports. It is acknowledged in the literature that trade flows have a number of zero observations and the conventional practice is to drop them when estimating the equation.
Alternatives have been suggested to incorporate the zeroes in many ways. One of them is to use ln(1+imports) instead of ln(imports) and estimate the equation by scaled OLS.
Question: Is there any specific command for scaled OLS? Or is it just OLS applied to the slightly different dependent?
Many thanks for your suggestion.
Research Postgraduate
Leverhulme Centre for Research on Globalisation and Economic Policy
C42, School of Economics
The University of Nottingham
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