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 and time-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. / Series: Working Papers in Regional Science
Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:6886 |
Date | 25 March 2019 |
Creators | LeSage, James, Fischer, Manfred M. |
Publisher | WU Vienna University of Economics and Business |
Source Sets | Wirtschaftsuniversität Wien |
Language | English |
Detected Language | English |
Type | Paper, NonPeerReviewed |
Format | application/pdf |
Relation | https://orcid.org/0000-0002-0033-2510, http://epub.wu.ac.at/6886/ |
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