State Dependence and Unobserved Heterogeneity in the Extensive Margin of Trade
Julian Hinz, Amrei Stammann, Joscka Wanner
| Year of publication: |
2021 ; This version: July 06,2021
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| Authors: | Hinz, Julian ; Stammann, Amrei ; Wanner, Joschka |
| Publisher: |
Potsdam : Universität Potsdam |
| Subject: | dynamic binary choice | extensive margin | high-dimensional fixed effects | incidental parameter bias correction | trade policy | Systematischer Fehler | Bias | Schätzung | Estimation | Theorie | Theory | Panel | Panel study | Außenwirtschaftspolitik | Foreign economic policy |
freely available
| Extent: | 1 Online-Ressource (62 Seiten, 925 KB) |
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| Series: | CEPA discussion papers. - Potsdam : Center for Economic Policy Analysis, University of Potsdam, ISSN 2628-653X, ZDB-ID 2969685-9. - Vol. No. 36 |
| Type of publication: | Book / Working Paper |
| Type of publication (narrower categories): | Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper |
| Language: | English |
| Notes: | Gesehen am 12.07.2021 We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary choice models and study the corresponding incidental parameter problem. The standard maximum likelihood estimator is consistent under asymptotics where all panel dimensions grow at a constant rate, but it has an asymptotic bias in its limiting distribution, invalidating inference even in situations where the bias appears to be small. Thus, we propose two different bias-corrected estimators. Monte Carlo simulations confirm their desirable statistical properties. We apply these estimators in a reassessment of the most commonly studied determinants of the extensive margin of trade. Both true state dependence and unobserved heterogeneity contribute considerably to trade persistence and taking this persistence into account matters significantly in identifying the effects of trade policies on the extensive margin. |
| Other identifiers: | 10.25932/publishup-51191 [DOI] |
| Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012600147