Conventional versus network dependence panel data gravity model specifications

LeSage, James P. and Fischer, Manfred M. ORCID: (2019) Conventional versus network dependence panel data gravity model specifications. Working Papers in Regional Science, 2019/02. 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 conventional multidimensional fixed 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 Markov Chain Monte Carlo 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. The most important sources of network dependence were found to be membership in trade organizations, historical colonial ties, common currency and spatial proximity of countries.

Item Type: Paper
Keywords: origin-destination panel data ows, cross-sectional dependence, log-marginal like- lihood, gravity models of trade, sociocultural distance, convex combinations of interaction matrices
Classification Codes: JEL C18, C33, C51
Divisions: Departments > Sozioökonomie > Wirtschaftsgeographie und Geoinformatik
Depositing User: ePub Administrator
Date Deposited: 11 Feb 2019 14:55
Last Modified: 04 Nov 2019 13:22


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