All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

 
Jordi Paniagua
 
''A note on implementing gravity datasets with abundant zeros''
( 2016, Vol. 36 No.1 )
 
 
This note presents a procedure to construct lighter FDI gravity datasets. The standard estimates using all potential dyads and many zeros are inefficient and present convergence issues. The standard balanced approach overlooks the fact that FDI is highly unbalanced and numerous country pairs rarely show investment activity. An empirical application reveals that our method improves the quality of statistical estimation. Standard datasets underestimate the effect of firm selection and heterogeneity and overestimate the negative effect of distance. Our method to construct gravity datasets reduces the number of zeros and yields unbiased estimates.
 
 
Keywords: foreign direct investment, FDI, gravity equation, zeros, dataset, PPML
JEL:
F2 - International Factor Movements and International Business: General
 
Manuscript Received : Mar 10 2015 Manuscript Accepted : Feb 21 2016

  This abstract has been downloaded 554 times                The Full PDF of this paper has been downloaded 104265 times