Gravity: Back to Logs

Thomas M. Menino Convention & Exhibition Center 

The Gravity Equation has been the empirical workhorse of the international trade literature. Originally, this technique regressed the logarithm of trade volumes on the logarithm of GDP and other controls. More recently, use of PPML techniques which provides various advantages to the logarithmic counterpart. This paper illustrates some shortcomings of this technique, and evaluate through a simulation study whether an alternative model based on additive and multiplicative effect network models can improve on these limitations.

Gravity

AMEN

PPML

Social Networks

International trade 

Business and Economic Statistics Section