The role of socio-cultural factors in static trade panel models

Fischer, Manfred M. ORCID: https://orcid.org/0000-0002-0033-2510 and LeSage, James P. (2018) The role of socio-cultural factors in static trade panel models. Working Papers in Regional Science, 2018/04. WU Vienna University of Economics and Business, Vienna.

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Abstract

The focus is on cross-sectional dependence in panel trade flow models. We propose alternative specifications for modeling time invariant factors such as socio-cultural indicator variables, e.g., common language and currency. These are typically treated as a source of heterogeneity eliminated using fixed effects transformations, but we find evidence of cross-sectional dependence after eliminating country-specific effects. These findings suggest use of alternative simultaneous dependence model specifications that accommodate cross-sectional dependence, which we set forth along with Bayesian estimation methods. Ignoring cross-sectional dependence implies biased estimates from panel trade flow models that rely on fixed effects.

Item Type:	Paper
Keywords:	Bayesian, MCMC estimation, socio-cultural distance, origin-destination flows, treatment of time invariant variables, panel models
Classification Codes:	JEL C18, C51, R11
Divisions:	Departments > Sozioökonomie
Depositing User:	Gertraud Novotny
Date Deposited:	19 Jun 2018 13:57
Last Modified:	02 Sep 2020 15:27
FIDES Link:	https://bach.wu.ac.at/d/research/results/86509/
URI:	https://epub.wu.ac.at/id/eprint/6361

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