Controlling for Heterogeneity in Gravity Models of Trade

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Table 2: Regression results for models using pooled data; 1991-95;dependent variable = log of exportsconstant -5.007*(0.477)origin GDP 0.621*(0.023)destination GDP 0.847*(0.020)origin population 0.088*(0.029)dest. population -0.061*(0.024)distance -0.819*(0.036)contiguity 0.200(0.142)common language 0.700*(0.076)1992 -0.005(0.091)1993 0.027(0.091)1994 0.022(0.091)1995 0.056(0.091)pooled cross-section fixed effects alternatives w/heterog.PCSa PCSb FEa FEb BEa Ma-4.931*(0.453)0.664*(0.018)0.807*(0.015)-0.819*(0.036)0.190(0.143)0.696*(0.076)-0.004(0.091)0.028(0.091)0.022(0.091)0.056(0.091)- - 0.034†(0.020)0.293*(0.066)0.520*(0.054)1.762*(0.685)-2.014*(0.352)0.030(0.019)0.050*(0.023)0.099*(0.029)0.198*(0.035)0.323*(0.063)0.506*(0.054)0.021(0.018)0.035*(0.018)0.073*(0.019)0.164*(0.022)0.195*(0.083)0.427*(0.066)2.293†(1.195)-1.458*(0.587)-0.023(0.022)0.023(0.021)0.080*(0.021)-4.505(10.887)0.293(0.263)0.520*(0.214)1.769(2.732)-2.016(1.403)0.030(0.076)0.050(0.094)0.099(0.114)0.198(0.138)observations 2110 2110 2110 2110 1688 2110parameters 12 10 430 428 8 147log-likelihood -3575.10 -3582.57 131.01 107.80 -331.93 -2950.432R 0.641 0.638 0.987 0.986 0.073 0.788Akaike Info. Crt. 3.400 3.405 0.283 0.304 0.403 2.935Amemiya Prob. Crt. 1.755 1.764 0.078 0.080 0.088 1.102sum of sqd. resids. 3660.23 3686.24 109.11 111.54 146.45 2024.71All non-dummy variables are in logs. Standard errors are in parentheses. * and † denote significanceat 5% and 10% levels. For the BEa model all variables are in differences from the previous year.28
Table 3: Regression results with integration dummies; 1991-95;dependent variable = log of exportspooled cross-sectionPCSafixed effectsFEaconstant -3.572* (0.490) -origin GDP 0.649* (0.023) 0.312* (0.067)destination GDP 0.870* (0.020) 0.524* (0.054)origin population 0.054† (0.028) 1.864* (0.690)destination population -0.083* (0.024) -1.948* (0.356)distance -1.022* (0.041)contiguity 0.025 (0.144)common language 0.622* (0.075)European bloc -1.112* (0.115) 0.064 (0.044)North American bloc -0.062 (0.397) 0.157 (0.233)MERCOSUR -3.165* (0.924) 0.166 (0.202)1992 -0.006 (0.089) 0.027 (0.019)1993 0.027 (0.089) 0.047* (0.024)1994 0.104 (0.089) 0.087* (0.030)1995 0.149† (0.089) 0.181* (0.037)observations 2110 2110parameters 15 433log-likelihood -3524.73 132.972R 0.657 0.987Akaike Info. Crt. 3.355 0.284Amemiya Prob. Crt. 1.678 0.078sum of sqd. resids. 3489.61 108.91All non-dummy variables are in logs. Standard errors are in parentheses. * and †denote significance at 5% and 10% levels.29
Page 1 and 2: WORKING PAPER SERIESControlling for
Page 3 and 4: Controlling for Heterogeneity in Gr
Page 5 and 6: simply on the basis of goodness of
Page 8 and 9: independent variables are assumed t
Page 10: GDPs, their populations, and the di
Page 13 and 14: GDP should be associated with a 6.2
Page 15 and 16: that it may be different for each d
Page 17 and 18: cross-section results, the year dum
Page 19 and 20: country-pair effects from the FE mo
Page 21 and 22: and BEa results differ enough to re
Page 23 and 24: primary change over the period was
Page 25 and 26: 7. ConclusionsThe objective of this
Page 27 and 28: ReferencesAitken, N. D., 1973, “T
Page 29: Table 1: Regression results for sin

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