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Controlling for Heterogeneity in Gravity Models of Trade and Integration: Archival Version
Open accessAbstract
This paper compares various specifications of the gravity model of trade as nested versions of a general specification that uses bilateral country-pair fixed effects to control for heterogeneity. For each specification, we show that the atheoretical restrictions used to obtain them from the general model are not supported statistically. Because the gravity model has become the "workhorse" baseline model for estimating the effects of international integration, this has important empirical implications. In particular, we show that, unless heterogeneity is accounted for correctly, gravity models can greatly overestimate the effects of integration on the volume of trade.
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Terms of trade and global efficiency effects of free trade agreements, 1990–2002
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Metadata
- Authors
- Cheng, I.-H., & Wall, H. J.
- Venue
- ICPSR Data Holdings
- Published
- 2005-03-15
- OpenAlex
- W3121400666
- Cited by
- 465
- References
- 1
- Type
- dataset
- Language
- en
- Open access
- green
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