International Trade Modelling by Paul Krugman (auth.), M. G. Dagenais, P.-A. Muet (eds.)

By Paul Krugman (auth.), M. G. Dagenais, P.-A. Muet (eds.)

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Ii) Econometric methods. The model was estimated using weighted least squares as with the perfect competition null case model. The vanances were estimated as before by regressing the residuals on GDP size. Multicollinearity is even more of a problem in this model than in the perfect competition model, since for many observations the factor endowment is the same small fraction of the same rest-of-world endowment. The pattern of interdependence for the Helpman-Krugman factors therefore turns out to be essentially similar to the pattern for Heckscher-Ohlin excess factors analysed before.

For inferences on individual factor coefficients, more information will be needed, either in the form of prior restrictions or in larger data sets with more countries and more years. 93 Lab3~, Lab1 +,Oil~ Lab3 +, Cap+, Coal+, Oil+, Lab2 +, Land2 ~ Lab1 + Cap~, Labl +, Oil~ Mins +, Land4 -Land2 + Mins +, Land2 + Lab1 + Land4 +, Land2 + Lab3 ~, Labl +, Cap~ 'For factor and industry definitions, see the section on preliminary data analysis. 5. With the usual exception of the petroleum industry, the coefficients of multiple correlation (R 2) are quite acceptable for a cross-section regression, and are almost uniformly higher than the fits for the observed aggregation bias.

It contains assumptions covering the disposition of the world economy's factors, technologies, and tastes. Due to the practical limitations of data collection, however, this model is not yet a testable form. (a) Null model assumptions A testable form which is estimated here imposes two further assumptions. The first assumption is necessary because data on all the trading partners' input-output matrices are not available: all countries' technologies are identical. This technology is then imputed from the relationship between trade flows and factors.

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