Gravity models and the Law of Large Numbers

被引：1

作者：

Jareb, Colin ^{[1
]}

Nigai, Sergey ^{[1
,2
]}

机构：

[1] Univ Colorado Boulder, 256 UCB, Boulder, CO 80309 USA

[2] CESIfo, Munich, Germany

来源：

ECONOMICS LETTERS | 2022年 / 221卷

关键词：

Trade gravity; Law of Large Numbers; Hat algebra; Gains from trade; TRADE COSTS;

D O I：

10.1016/j.econlet.2022.110911

中图分类号：

F [经济];

学科分类号：

02 ;

摘要：

This paper examines the implications of uncertainty in gravity models of trade due to the violation of the Law of Large Numbers (LLN) that we document in the data. When the number of available technologies is finite and the LLN does not hold, the variance of the stochastic component in gravity models is large, which leads to the poor goodness of fit of gravity models and high uncertainty in comparative statics results. We offer a procedure that specifies counterfactual predictions in terms of distributions rather than point estimates and helps to account for such uncertainty.(c) 2022 Elsevier B.V. All rights reserved.

引用

页数：4