Welcome to The Log of Gravity page.
Reference (now with open access):
Santos Silva, J.M.C. and Tenreyro, Silvana (2006), The Log of Gravity, The Review of Economics and Statistics, 88(4), pp. 641-658.
An early version of the paper can be found at CEP/LSE (and an even earlier version at Boston Fed).
In this page you can find the data set used in the paper, codes to extend some of the results in the paper, and other useful information on the implementation of the PPML estimator.
If you cannot find here the answer to your question about The Log of Gravity, please do not hesitate to contact the authors; we will be only too pleased to help.
The dataset (in xls and dta formats) is available here.
Convergence problems:
Instrumental Variables:
We have written a crude Stata command (recently updated) to estimate the
IV version of PPML. This estimator
was originally described in Windmeijer, F. and Santos Silva, J.M.C. (1997),
"Estimation
of Count Data Models with Endogenous regressors: An Application to Demand for Health Care," Journal of Applied Econometrics,
12(3), pp. 281-294. Here is an example of how to use the command.
UPDATE: This estimator is now implemented in Stata 13;
see the ivpoisson command and the add option (the default).
RESET test:
Here is a
sample of the code to perform the test.
R-squared:
If you want to compute the R-squared for a
model estimated by PPML, you can used the method implemented
here.
PPML performance with many zeros:
Simulation evidence on the excellent performance of the PPML estimator
when the data has many zeros can be found in this
Economics Letters
paper.
Warning:
Be advised that there are several papers purporting to introduce estimators that improve on the PPML. While it is
of course possible to find estimators that outperform PPML in very specific conditions, and under reasonably strong distributional
assumptions, to our knowledge, all the proposed alternatives to PPML are either simply invalid or valid only under implausibly
strong distributional assumptions. Therefore we stand by the claim that PPML has all the characteristics needed to be the workhorse
for the estimation of constant-elasticity models such as the gravity equation. If you believe to have evidence that another estimator
generally outperforms PPML in this context please do let us know; we would be delighted to acknowledge that.
We have written a short reply to "The log of gravity revisited".
If you want to compute 'undertrading' and 'overtrading' after fixed-effects regressions with panel data, you need to obtain a set of residuals with zero mean. Here is how to do it.
In this Annual Review of Economics paper we use the PPML estimator to estimate the trade effect of the euro; an earlier version is available here.
Related work by other authors:
Eight FAQ's & myths about the Log of Gravity
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Last updated on 20 January 2014