There are loads of papers that are critical of the methodology (i could give
you a few more criticisms) but in the absence of better techniques and more
complete data, this is one the most feasible ways of analysing trade in
partial equilibrium settings!
----- Original Message -----
From: "Austin Nichols" <[email protected]>
To: <[email protected]>
Sent: Thursday, August 02, 2007 3:53 PM
Subject: Re: st: Using 2 stage Heckmen Sample Selection with Lags in STATA
> Seema--
> Just googled "standard gravity model" and found a bunch of papers
> criticizing it, e.g.
> http://www.tbm.tudelft.nl/webstaf/ceesb/gravityweb.pdf
> who makes another good point--if you are considering importing from
> country i, the distance from you to country i is less important than
> the distance relative to other potential exporters, since the relative
> distance is what measures the effective "price" of trade between you
> and country i.
>
> On 8/2/07, Austin Nichols <[email protected]> wrote:
>> Seema--
>> I am not familiar with the "standard gravity model" though I suspect
>> it models trade as a function of the reciprocal of the square of
>> distance along an ellipsoid between the centroids of two countries,
>> among other things. This seems inappropriate for various reasons
>> (even if using production- or population-weighted centroids, the
>> relevant distance is not as the crow flies--e.g. contiguity is likely
>> more important, as are topographical features, and historical
>> relationships/religion/language/etc. even more important) though if
>> the model is "standard" I suppose am unlikely to talk you out of it.
>>
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