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

Fischer, Manfred M. ORCID: 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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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


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