Modeling International Trade of Forest Products: Application of PPML to a Gravity Model of Trade.

ABSTRACT: To model international trade of forest products we use a gravity model of trade. In modeling trade, we estimate the impact of importer gross domestic product (GDP), exporter GDP, and distance between trading partners using Poisson pseudo-maximum likelihood (PPML). When estimating the log-linearized gravity model (ordinary least squares [OLS]), two issues arise. First, potential bias associated with truncation of all zero-trade observations due to the nonexistence of the natural log of zero. Second, heteroscedasticity can bias results from the log-linearized gravity model because of the multiplicative error term of the stochastic gravity model. To address these two issues, we propose avoiding the log-linearized gravity model and instead estimate the nonlinear gravity model via PPML. To esti

SUBMITTER: Larson J 

PROVIDER: S-EPMC7147786 | biostudies-literature | 2018

REPOSITORIES: biostudies-literature