MCMC estimation of panel gravity models in the presence of network dependence

LeSage, James P. and Fischer, Manfred M. ORCID: (2018) MCMC estimation of panel gravity models in the presence of network dependence. Working Papers in Regional Science, 2018/07. WU Vienna University of Economics and Business, Vienna.


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Past focus in the panel gravity literature has been on multidimensional fixed effects specifications in an effort to accommodate heterogeneity. After introducing fixed effects for each origin- destination dyad and time-period speciffic effects, we find evidence of cross-sectional dependence in flows. We propose a simultaneous dependence gravity model that allows for network dependence in flows, along with computationally efficient MCMC estimation methods that produce a Monte Carlo integration estimate of log-marginal likelihood useful for model comparison. Application of the model to a panel of trade flows points to network spillover effects, suggesting the presence of network dependence and biased estimates from conventional trade flow specifications.

Item Type: Paper
Keywords: origin-destination panel data flows, cross-sectional dependence, log-marginal likelihood, sociocultural distance, convex combinations of interaction matrices
Classification Codes: JEL C18, C33, C51
Divisions: Departments > Sozioökonomie
Depositing User: ePub Administrator
Date Deposited: 03 Oct 2018 11:08
Last Modified: 02 Sep 2020 15:23


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