The Poisson quasi-maximum likelihood estimator: a solution to the ‘adding up’ problem in gravity models

This article shows that the Poisson Quasi-Maximum Likelihood (QML) estimator applied to the gravity model produces estimates in which, summing across all partners, actual and estimated total trade flows are identical. Other methods such as OLS do not have this desirable property. Indeed, Poisson is the only QML estimator that preserves total trade flows. This result is an additional reason for preferring Poisson as a workhorse gravity model estimator.

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Year of publication:	2013
Authors:	Arvis, Jean-François ; Shepherd, Ben
Published in:	Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 20.2013, 6, p. 515-519
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010976404