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Cross-sectional dependence model specifications in a static trade panel data setting

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

Identiferoai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:5904
Date January 2017
CreatorsLeSage, James P., Fischer, Manfred M.
PublisherWU Vienna University of Economics and Business
Source SetsWirtschaftsuniversität Wien
LanguageEnglish
Detected LanguageEnglish
TypePaper, NonPeerReviewed
Formatapplication/pdf
Relationhttp://epub.wu.ac.at/5904/

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