Poisson Pseudo-maximum Likelihood Estimator Research Articles

The Impact of FTAs on MENA Exports of Intermediate and Final Goods

This paper is the first to analyze the impact of free trade agreements (FTAs) and the harmonization of rules of origin (RoO) on Middle East and North African (MENA) countries’ exports differentiating between final and intermediate goods for a global sample of trade partners. Data on exports from four MENA countries (Egypt, Jordan, Morocco and Tunisia) to 61 destinations over the period 1995-2016 are used to estimate a structural gravity model applying a Poisson Pseudo Maximum Likelihood (PPML) estimator. Moreover, the paper estimates the effect of the progressive adoption of the Pan-European-Mediterranean RoO. Results show that FTAs have been overall successful in increasing MENA exports. This is particularly true for FTAs that eliminate protection on agricultural products. In contrast to the existing literature, we find that the agreements concluded with European countries raise MENA exports, whereas no significant impact is found for the application of the Pan-European RoO.

DETERMINANTS OF VIRTUAL WATER TRADE OF CEREAL CROPS IN SAUDI ARABIA

In this research, we used a gravity model to investigate whether water scarcity variables influence agricultural trade of cereal crops for Saudi Arabia. We compare the OLS, Fixed effects, Random effects, and Poisson Pseudo-Maximum Likelihood (PPML) estimators to determine the best model. The AIC, and multicollinearity, heteroskedasticity, and autocorrelation tests assist in determining estimation procedures and the final model. We cluster the errors by distance to improve the specific country effect variables, such as economic mass. We find that water-related variables influence virtual water imports of cereals, millet, corn, barely, and sesame.

Determinants of International Beer Export

The aim of this paper was to identify factors influencing dynamics of international beer export. The Poisson pseudo maximum likelihood estimator was employed to estimate the export determinants of the biggest global beer exporters to 199 destinations between 2000 and 2017. We estimated that international beer export is positively influenced by gross domestic product of importing countries and cultural similarities. Trade between countries that share common borders, same language or colonial links has shown to be a very strong and positive determinant. We found a significant role of customs unions and signed free trade agreements; however, this result was not robust across all estimated models. Beer export is negatively affected by the distance between trading countries and their landlockedness, which confirms the relevance of transport cost in beer trade. Beer exports are declining with rise in population of importing countries, which signals an advantage in targeting countries with less differentiated beer supply.

Determinants of International Beer Export

The aim of this paper was to identify factors influencing dynamics of international beer export. The Poisson pseudo maximum likelihood estimator was employed to estimate the export determinants of the biggest global beer exporters to 199 destinations between 2000 and 2017. We estimated that international beer export is positively influenced by gross domestic product of importing countries and cultural similarities. Trade between countries that share common borders, same language or colonial links has shown to be a very strong and positive determinant. We found a significant role of customs unions and signed free trade agreements; however, this result was not robust across all estimated models. Beer export is negatively affected by the distance between trading countries and their landlockedness, which confirms the relevance of transport cost in beer trade. Beer exports are declining with rise in population of importing countries, which signals an advantage in targeting countries with less differentiated beer supply.

THE RUPTURE OF THE HUB-SPOKE EFFECT OF BILATERAL TRADE FLOWS WHEN RULES OF ORIGIN ARE RELAXED: THE CASE OF AGADIR AGREEMENT COUNTRIES.

This paper aims at shedding light on the extent to which the Agadir Association agreement has fostered inter regional trade between the EU_26 and the Agadir_4. It analyzes the remarkable variation in the spatial/sectoral structure of exports, and the extent to which it has been induced by the Agadir agreement itself or due to the adoption of RoO PANEURO diagonal cumulative scheme. The dataset covers a timeframe from [2000 - 2014] designed to account for sector specific final and intermediate exports through a bilateral gravity model and through tbe Poisson Pseudo Maximum Likelihood Estimator PPML. The methodological approach is considered to be a two-fold one which starts by screening final export and intermediate flows through conducting a ‘Hierarchal Cluster Analysis’. Second step proceeds by exposing the export flows of the 3 clusters to treatment with diagonal RoO through ‘The Double Differences Approach’ DID benchmarked to equally comparable control groups. Across all scenarios applied a remarkable significance of the interaction term combining both treatment effects and time, for the coefficients of 11 out of the 13 sectors were detected and it further asserted that treatment with diagonal RoO contributed to increasing intra-Agadir’s_4 final and intermediate exports and exports to E.U._26.

Does political regime influence bilateral trade in West Africa?

Most regional trade agreements ascribe great importance to member country’s political regimes of which preference is given to democratisation. In this paper, we investigate the influence of political regimes on bilateral trade in West Africa. We exploit two different ratings for political regime: Freedom House and Polity IV and applied Poisson pseudo maximum likelihood estimation technique. The empirical results reveal that political regime is significant to trade determination. Result portrays that generally; democratic regime positively and significantly influences bilateral trade and is homogenous in export and import. In West Africa, being import dependent, such influence is only robust as importer. We further noted that the influence of political regime on bilateral trade depends on the region and level of income; favourable to high-income Western countries. The results further indicate that two countries of similar political regimes trade less which is consistent in West African region.

The Impact of CEMAC Bilateral Trade on the Economic Growth of Cameroon: Evidence from the Augmented Solow Model

Economists view international trade as an engine to the economic growth of nations. Specifically, international trade is believed to promote the efficient allocation of resources, allows countries to experience the benefits of scale, facilitates the diffusion of knowledge, fosters technological progress and encourages competition. As a result, policy makers continue to undertake socio-economic, legal, political and institutional reforms in order to boost international trade. The study examines the impact of bilateral trade in the Economic and Monetary Union of Central African States (CEMAC) on the economic growth of Cameroon for a forty six year period from 1972 to 2018 using data collected from the World Bank and the International Monetary Fund. Through the adoption of the Poisson Pseudo Maximum Likelihood Estimator (PPML), the study finds out that while Cameroon’s bilateral trade with other CEMAC member States had an insignificant impact on the economic growth of Cameroon. Also, total labour force, government investment in education, government investment in fixed capital and the creation of CEMAC as a trade bloc all have a positive impact on the economic growth of Cameroon. The study recommends that policy makers in Cameroon and the CEMAC region as a whole should put in place laws, policies, measures and structures that boost bilateral trade within the CEMAC region in a bid to foster the economic growth of Cameroon as well as the economic growth of the CEMAC region as a whole. Keywords: International trade, Economic growth, CEMAC, Poisson Pseudo Maximum Likelihood (PPML) Estimator. DOI: 10.7176/JESD/11-10-19 Publication date: May 31 st 2020

EUROPEAN UNION AND TRADE INTEGRATION: DOES THE HOME BIAS PUZZLE MATTER?

This paper analyses the size of the border effect or home bias within the European Union (EU) with the aim to quantify its impact in the trade integration process which started in 1992. The gravity model serves as a general framework where the use of sectoral data allows obtaining a more accurate measure of the border effects. The econometric analysis applied to a gravity model that contains a high disaggregation in the data introduces heteroskedasticity problems together with the presence of zero values, therefore, in order to obtain consistent estimates, the use of the Poisson Pseudo-Maximum Likelihood estimation method is recommended. Our results show that the bilateral trade ?ows depend upon the size and proximity of the trade partners, together with other variables as adjacency or language. Evidence in favour of a positive and diminishing border effect has been found for the period 1995-2006 and it accounts for 20% to 22% within the EU-19.

The dual trade impact of non-tariff measures: an empirical assessment of China’s pork imports

Abstract Theoretical arguments and empirical evidence suggest that non-tariff measures (NTMs) generate a mixture of trade effects. Using the maximum level of disaggregation provided by the UNCTAD NTMs database (four-digit), and focusing on those measures applied by China in its pork trade, a gravity equation is estimated with the poisson pseudo maximum likelihood estimator. Results confirm both restricting and promoting effects that higher levels of NTM aggregation mask. Compared to the average tariff applied by main importers (9 per cent) and China (14 per cent), the most restrictive NTMs are more stringent, with ad-valorem equivalents between 15 and 33 per cent. Simulations illustrate the upper bound bilateral trade gain from NTM removal and the resulting repercussions for China’s pork import shares.

Determinants of Trade Between Taiwan and ASEAN Countries: A PPML Estimator Approach

Taiwan and Association of Southeast Asian Nations (ASEAN) do not have any diplomatic ties, but they have enjoyed significantly economic benefits, especially bilateral investment and trade cooperation. Over the period 2000–2017, trade between Taiwan and ASEAN had significantly focused on manufactured goods embodied with high-skill and technology-intensive content. Using gravity model with a PPML (Poisson pseudo-maximum-likelihood) estimator, this article explores determinants of bilateral trade flows between them at both aggregate and sectoral levels. We found that economic scale and per capital income of ASEAN have much stronger effects than those of Taiwan at both aggregate trade and the degree of manufacturing. Results also show that bilateral trade between Taiwan and ASEAN has been efficiently performed over recent decades, except for cases of Myanmar and Cambodia. Hence, a dynamic approach should be taken by both sides to promote bilateral trade relations in future.

An investigation of Confucius Institute’s effects on China’s OFDI via cultural difference and institutional quality

PurposeThis study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with cultural difference and institutional quality in host countries.Design/methodology/approachIn the empirical study, the gravity model is adopted as the benchmark to investigate the effects of CI on China's OFDI using the ordinary least squares or Poisson Pseudo Maximum Likelihood estimators. Panel data on China's OFDI from 2004 to 2015 are used. Cultural difference and institutional quality are included explicitly as control variables to examine the effects of CI on China's OFDI.FindingsCI has a significant positive effect on China’s OFDI, and this effect depends on the cultural difference and institutional quality of the host country. The impact of CI on China’s OFDI is more prominent in host countries with a smaller cultural difference or lower institutional quality.Originality/valueCI is a comprehensive platform for foreign cultural exchange and signifies the rebirth of Confucianism in China. The present study shows that CI can stimulate the growth of China’s OFDI, with implications for other Asian countries influenced by Confucianism. Based on the results of the study, strategies for “Going Global” and encouraging economic growth based on cultural exchange and the recognition of host country heterogeneities are proposed.

Examining the trade potential of the UAE using a gravity model and a Poisson pseudo maximum likelihood estimator

When the United Arab Emirates (UAE) started exporting oil in 1962, it leveraged off the country's economy to emerge as one of the world's fastest-growing nations. Recently, however, worries about the vulnerability of the economy from shocks in international oil prices have effectuated a rapid transformation based on production and trade diversification. Trade agreements and liberalization policies turned the country into a regional trade hub. Given the recent changes in the economy's structure and the importance of trade for the UAE economy, we examine opportunities for the country to further expand trade. We use a gravity equation on 2002–2016 panel data and a Poisson pseudo maximum likelihood estimator to examine the determinants of trade and the trade potential. We compare the results obtained from a theory-consistent econometric approach for the estimation of gravity with the results obtained from past ‘intuitive’ approaches to gravity estimation and infer on the bias present. Results reveal that the UAE has exhausted trade potential with some of its major trading partners including many member countries of the GCC and PAFTA. However, potential for trade expansion exists with many other countries, including Japan and India that could dictate future policy efforts for trade expansion.

Intergenerational Income Elasticities, Instrumental Variable Estimation, and Bracketing Strategies

The fact that the intergenerational income elasticity (IGE)—the workhorse measure of economic mobility—is defined in terms of the geometric mean of children’s income generates serious methodological problems. This has led to a call to replace it with the IGE of the expectation, which requires developing the methodological knowledge necessary to estimate the latter with short-run measures of income. This article contributes to this aim. The author advances a “bracketing strategy” for the set estimation of the IGE of the expectation that is equivalent to that used to set estimate (rather than point estimate) the conventional IGE with estimates obtained with the ordinary least squares and instrumental variable (IV) estimators. The proposed bracketing strategy couples estimates generated with the Poisson pseudo–maximum likelihood estimator and a generalized method of moments IV estimator of the Poisson or exponential regression model. The author develops a generalized error-in-variables model for the IV estimation of the IGE of the expectation and compares it with the corresponding model underlying the IV estimation of the conventional IGE. By considering both bracketing strategies from the perspective of the partial-identification approach to inference, the author specifies how to construct confidence intervals for the IGEs, in particular when the upper bound is estimated more than once with different sets of instruments. Finally, using data from the Panel Study of Income Dynamics, the author shows that the bracketing strategies work as expected and assesses the information they generate and how this information varies across instruments and short-run measures of parental income. Three computer programs made available as companions to the article make the set estimation of IGEs, and statistical inference, very simple endeavors.

Razvoj infrastrukture, institucija, trgovina unutar regiona - slučaj istočne Afrike

This study empirically examines the relationship between infrastructure stock and bilateral trade flows using a panel of 11 countries in East Africa for the period 2000 to 2018. Infrastructure augmented gravity model was estimated using total bilateral exports for the countries in East Africa. Infrastructure was disaggregated into transport and information and communications technology (ICT) infrastructures. Two institutional variables, control of corruption index and regulatory quality, were incorporated in the model. By employing Poisson Pseudo Maximum Likelihood (PPML) estimator, the results confirm that both ICT and transport infrastructures and quality institutions positively impact on the volumes of total bilateral exports in East Africa. However, ICT infrastructure has a greater impact on trade flows compared to transport infrastructure. Therefore, more resources should be channelled towards increasing the stock of ICT infrastructure to propel trade and regional integration in East Africa.

Constrained Poisson pseudo maximum likelihood estimation of structural gravity models

This paper reconsiders the estimation of structural gravity models. It introduces a constrained, projection-based Poisson pseudo maximum likelihood estimation procedure (constrained PPML) that exploits the equilibrium conditions introduced by Anderson and Van Wincoop (2003) for estimation and inference. The constrained PPML estimator avoids the estimation of the large number of exporter and importer fixed effects, and provides more reliable inference than the unconstrained PPML estimator. Moreover, based on the delta method the paper drives confidence intervals of counterfactual changes. Monte Carlo simulations yield encouraging results on the performance of the constrained PPML estimator.

Estimating the gravity model when zero trade flows are frequent and economically determined

ABSTRACT Since the 1950s, we have known that the presence of zero-valued dependent variables can seriously bias econometric estimates whether the zeros are included or excluded. Yet the widely-used gravity model is frequently estimated on samples that include large fractions of zeros. An influential paper by Santos Silva and Tenreyro – based on simulations that include no economically-determined zeros – concludes that the bias problems resulting from zeros and those resulting from heteroscedasticity and nonlinearity can be solved using the Poisson Pseudo-Maximum-Likelihood (PPML) model including the zero values. This paper begins by adapting the Santos Silva and Tenreyro experimental design to include economically-determined zeros to see whether this conclusion continues to hold. With this design, it finds that alternative estimators have lower bias than PPML. Changing to a Monte Carlo design that replicates the much-higher real-world frequency of predicted values near zero restores the finding of lower bias with the PPML estimator. The results highlight the need for very careful design of Monte Carlo experiments when evaluating alternative estimators of the gravity model.

Do Free Trade Agreements Increase Australian Trade: An Application of Poisson Pseudo Maximum Likelihood Estimator?

This article examines the effects of Australia's free trade agreements on trade creation and export diversion of the total as well as sectoral trade. The empirical analysis implemented through Poisson pseudo maximum likelihood estimator with time and country-specific effects. Results showed the standard gravity variables are highly significant with the expected signs. Overall, the trade creation effects were greater than intra-block export diversion effects of FTAs on Australia’s total trade. The trade creation effects of FTAs on the agricultural sector seems higher than the nonagricultural sector in Australia after deducting intra-block export diversion effects in the respective sectors.

TÜRKİYE’DE ULUSLARARASI GÖÇ AKIMLARI ÇEKİM MODELİ ANALİZİ

Küresel siyasi ve iktisadi gelişmeler sonucunda uluslararası göçün önemi giderek artmaktadır. Nitekim uluslararası göç nedeniyle hem göç alan, hem de göç veren ülkelerin sosyal, iktisadi ve demografik yapılarında değişimler gözlenmektedir. Bu bağlamda göç üzerine yapılan çalışmalarda gerek nitel gerekse nicel anlamda gelişmeler söz konusudur. Türkiye bulunduğu stratejik konum itibariyle göç hareketliliğinin yüksek olduğu bir ülke durumundadır. Özellikle komşu ülkelerdeki yapısal değişiklikler ve siyasi karışıklıklardan dolayı son dönemlerde Türkiye’de ciddi göç akımları gerçekleşmekte ve tartışma güncelliğini korumaktadır. Bu bağlamda çalışmada 2016-2017 dönemi için Türkiye’nin seçilmiş 83 ülke ile arasındaki göç hareketliliği panel çekim modeli ile analiz edilmiştir. Model Poisson Pseudo Maximum Likelihood tahmincisi ile tahmin edilmiş; ülkeler arası uzaklık ve kaynak ülke GSYİH düzeyinin göç akımlarını azaltan faktörler olduğu belirlenmiştir. Hedef ülkenin GSYİH düzeyi, hedef ve kaynak ülke nüfusu göç akımlarını tetiklemektedir.

Estimating Poisson pseudo-maximum-likelihood rather than log-linear model of a log-transformed dependent variable

Purpose The purpose of this study is to account for a recent non-mainstream econometric approach using microdata and how it can inform research in business administration. More specifically, the paper draws from the applied microeconometric literature stances in favor of fitting Poisson regression with robust standard errors rather than the OLS linear regression of a log-transformed dependent variable. In addition, the authors point to the appropriate Stata coding and take into account the possibility of failing to check for the existence of the estimates – convergency issues – as well as being sensitive to numerical problems. Design/methodology/approach The author details the main issues with the log-linear model, drawing from the applied econometric literature in favor of estimating multiplicative models for non-count data. Then, he provides the Stata commands and illustrates the differences in the coefficient and standard errors between both OLS and Poisson models using the health expenditure dataset from the RAND Health Insurance Experiment (RHIE). Findings The results indicate that the use of Poisson pseudo maximum likelihood estimators yield better results that the log-linear model, as well as other alternative models, such as Tobit and two-part models. Originality/value The originality of this study lies in demonstrating an alternative microeconometric technique to deal with positive skewness of dependent variables.

Does the GATT/WTO promote trade? After all, Rose was right

This paper re-examines the effect of the GATT/WTO on trade using recent econometric developments that allow us estimating structural gravity equations with the Poisson pseudo-maximum likelihood (PPML) estimator on a large dataset that requires computing high-dimensional fixed effects. By doing so, we overcome computational limitations that are present in previous studies. In line with Rose’s (Am Econ Rev 94:98–114, 2004) seminal work, we find that, unlike regional trade agreements and currency unions, the GATT/WTO accession has not generated positive trade effects. This result is robust to the use of alternative measures of trade flows, across periods and country groups, to changes in the periodicity of the data, when taking into account the GATT/WTO accession dynamics, to controlling for the participation of only one country of the dyad in GATT/WTO, to the consideration of non-member participants, and to the use of alternative datasets. Notwithstanding, we also find that PPML results are sensitive to the definition of the dependent variable.