European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Aggregravity: Estimating Gravity Models from Aggregate Data

Harald Badinger () and Jesus Crespo Cuaresma ()
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Harald Badinger: Department of Economics, Vienna University of Economics and Business
Jesus Crespo Cuaresma: Department of Economics, Vienna University of Economics and Business

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

JEL-codes: C13; F14; F17 September 2014

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