The role of socio-cultural factors in static trade panel models

James P. LeSage, Manfred M. Fischer

Publikation: Working/Discussion PaperWU Working Paper

28 Downloads (Pure)


The focus is on cross-sectional dependence in panel trade flow models. We propose alternative specifications for modeling time invariant factors such as socio-cultural indicator variables, e.g., common language and currency. These are typically treated as a source of heterogeneity eliminated using fixed effects transformations, but we find evidence of cross-sectional dependence after eliminating country-specific effects. These findings suggest use of alternative simultaneous dependence model specifications that accommodate cross-sectional dependence, which we set forth along with Bayesian estimation methods. Ignoring cross-sectional dependence implies biased estimates from panel trade flow models that rely on fixed effects.
PublikationsstatusVeröffentlicht - 2018


ReiheWorking Papers in Regional Science

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

  • 507026 Wirtschaftsgeographie
  • 507003 Geoinformatik

WU Working Paper Reihe

  • Working Papers in Regional Science