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J. M. C.
Paper No' CEPDP0933: | Full paper
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Keywords: Gravity equation; Heteroskedasticity, Jensen's inequality
JEL Classification: C13; C50; F10
Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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Abstract:We extend the simulation results given in Santos-Silva and Tenreyro (2006, ‘The Log of Gravity’, The Review of Economics and Statistics, 88, pp.641-658) by considering data generated as a finite mixture of gamma variates. Data generated in this way can naturally have a large proportion of zeros and is fully compatible with constant elasticity models such as the gravity equation. Our results confirm that the Poisson pseudo maximum likelihood estimator is generally well behaved.
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