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Frankel and Romer revisited
Örebro University, Örebro University School of Business. OECD, Paris, France.ORCID iD: 0000-0002-5944-3768
2018 (English)Report (Other academic)
Abstract [en]

Frankel and Romer (1999) proposed an instrument variable for trade intensity to robustly assess the causal impact of international trade on standards of living. The instrument is based on OLS estimates of the gravity equation and has been widely used in the literature. In this note I show that the instrument is unrelated to income in the mid-2000s. Re-estimating the gravity equation using PPML, I show that the resulting instrument is strongly related to GDP per capita, but weakly correlated with trade, suggesting that what is captured may be a direct link between geography and income.

Place, publisher, year, edition, pages
Örebro: Örebro University , 2018. , p. 7
Series
Working Papers, School of Business, ISSN 1403-0586 ; 2018:4
Keywords [en]
Trade, economic growth, instrument variables
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-73846OAI: oai:DiVA.org:oru-73846DiVA, id: diva2:1305559
Available from: 2019-04-17 Created: 2019-04-17 Last updated: 2019-04-17Bibliographically approved

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Nordås, Hildegunn Kyvik

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CiteExportLink to record
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Citation style
  • apa
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