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Two-way models for gravity



Type:   Working paper
Titre:   Two-way models for gravity
Auteur(s):   Jochmans, Koen (1982-...) - Département d'économie (Auteur)
Date de publication:   2015-12
Collection:   Sciences Po Economics Discussion Papers  :  2015-09
Résumé:   [en] Empirical models for dyadic interactions between n agents often feature agent-specific parameters. Fixed-effect estimators of such models generally have bias of order n−1,which is non-negligible relative to their standard error. Therefore, confidence sets based on the asymptotic distribution have incorrect coverage. This paper looks at models with multiplicative unobservables and fixed effects. We first derive moment conditions that are free of fixed effects. We next use these moment conditions to set up estimators that are n-consistent, asymptotically normally-distributed, and asymptotically unbiased. We provide Monte Carlo evidence for a range of models and we estimate a gravity equation with multilateral resistance terms as an empirical illustration.


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