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. / Series: Working Papers in Regional Science
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:5904 |
| Date | January 2017 |
| Creators | LeSage, James P., 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 | http://epub.wu.ac.at/5904/ |
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