Work detail

Various Estimation Techniques of the Gravity Model of Trade

Author: Mgr. Lucie Davidová
Year: 2015 - winter
Leaders: doc. Ing. Vladimír Benáček CSc.
Work type: Economic Theory
Language: English
Pages: 69
Awards and prizes:
Abstract: This diploma thesis deals with alternative estimation possibilities of the gravity model in
trade. We provide the reader with a synthetic methodological overview of the technical
problems with the estimation of gravity equations. Consequently, we test for the heterogeneity
of data sets used in gravity models of trade which leads us to a conclusion that behavioural
patterns of exporters and importers built in the datasets are very complicated and a single
generalized specification of gravity equation can lead to bias in estimates and/or to similarly
generalized conclusions that hide important robust idiosyncrasies in behavior present in some
subsamples of economic agents. Both the theory of estimation techniques and dataset
heterogeneity are applied in the empirical part estimating Austria’s export function.




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