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Department of Economics, WU (Wirtschaftsuniversität Wien) Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)

No 183:
Aggregravity: Estimating Gravity Models from Aggregate Data

Harald Badinger () and Jesus Crespo Cuaresma ()

Abstract: This paper considers alternative methods to estimate econometric models based on bilateral data when only aggregate information on the dependent variable is available. Such methods can be used to obtain an indication of the sign and magnitude of bilateral model parameters and, more importantly, to decompose aggregate into bilateral data, which can then be used as proxy variables in further empirical analysis. We perform a Monte Carlo study and carry out a simple real world application using intra-EU trade and capital flows, showing that the methods considered work reasonably well and are worthwhile being considered in the absence of bilateral data.

Keywords: Aggregation, gravity equations; (follow links to similar papers)

JEL-Codes: C13,; F14,; F17; (follow links to similar papers)

September 2014

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