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Trading partners and trading volumes: implementing the Helpman-Melitz-Rubinstein model empirically

Santos Silva, Joao and Tenreyro, Silvana (2013) Trading partners and trading volumes: implementing the Helpman-Melitz-Rubinstein model empirically. Oxford Bulletin of Economics and Statistics, 77 (1). pp. 93-105. ISSN 0305-9049

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Identification Number: 10.1111/obes.12055

Abstract

Helpman, Melitz and Rubinstein [Quarterly Journal of Economics (2008) Vol. 123, pp. 441–487] (HMR) present a rich theoretical model to study the determinants of bilateral trade flows across countries. The model is then empirically implemented through a two-stage estimation procedure. We argue that this estimation procedure is only valid under the strong distributional assumptions maintained in the article. Statistical tests using the HMR sample, however, clearly reject such assumptions. Moreover, we perform numerical experiments which show that the HMR two-stage estimator is very sensitive to departures from the assumption of homoskedasticity. These findings cast doubts on any inference drawn from the empirical implementation of the HMR model.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2013 The Department of Economics, University of Oxford and John Wiley & Sons Ltd
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 22 Jan 2014 12:32
Last Modified: 20 Jun 2019 01:50
Projects: PEst-OE/EGE/UI0491/2013, 240852
Funders: Fundação para a Ciência e Tecnologia, European Research Council
URI: http://eprints.lse.ac.uk/id/eprint/55398

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