Foreign languages and trade

Cultural factors and especially common languages are well-known determinants of trade. By contrast, the knowledge of foreign languages was not explored in the literature so far. We combine traditional gravity models with data on fluency in the main languages used in EU and candidate countries. We show that widespread knowledge of languages is an important determinant for foreign trade, with English playing an especially important role. Other languages (French, German, and Russian) play an important role mainly in particular regions. Furthermore, we document non-linear effects of foreign languages on trade. The robustness of the results is confirmed in quantile regressions

Network and panel quantile effects via distribution regression

This paper provides a method to construct simultaneous con fidence bands for quantile functions and quantile effects in nonlinear network and panel models with unobserved two-way effects, strictly exogenous covariates, and possibly discrete outcome variables. The method is based upon projection of simultaneous confi dence bands for distribution functions constructed from fixed effects distribution regression estimators. These fi xed effects estimators are bias corrected to deal with the incidental parameter problem. Under asymptotic sequences where both dimensions of the data set grow at the same rate, the confi dence bands for the quantile functions and effects have correct joint coverage in large samples. An empirical application to gravity models of trade illustrates the applicability of the methods to network data.https://arxiv.org/abs/1803.08154First author draf

Foreign languages and trade: Evidence from a natural experiment

Cultural factors and common languages are well-known determinants of trade. By contrast, the knowledge of foreign languages was not explored in the literature so far. We combine traditional gravity models with data on fluency in the main languages used in EU and candidate countries. We show that widespread knowledge of languages is an important determinant for foreign trade, with English playing an especially important role. The robustness of our results is confirmed by quantile regressions

Fixed Effect Estimation of Large T Panel Data Models

This article reviews recent advances in fixed effect estimation of panel data models for long panels, where the number of time periods is relatively large. We focus on semiparametric models with unobserved individual and time effects, where the distribution of the outcome variable conditional on covariates and unobserved effects is specified parametrically, while the distribution of the unobserved effects is left unrestricted. Compared to existing reviews on long panels (Arellano and Hahn 2007; a section in Arellano and Bonhomme 2011) we discuss models with both individual and time effects, split-panel Jackknife bias corrections, unbalanced panels, distribution and quantile effects, and other extensions. Understanding and correcting the incidental parameter bias caused by the estimation of many fixed effects is our main focus, and the unifying theme is that the order of this bias is given by the simple formula p/n for all models discussed, with p the number of estimated parameters and n the total sample size.Comment: 40 pages, 1 tabl

Quantiles for Fractions and Other Mixed Data

This paper studies the estimation of quantile regression for fractional data, focusing on the case where there are mass-points at zero or/and one. More generally, we propose a simple strategy for the estimation of the conditional quantiles of data from mixed distributions, which combines standard results on the estimation of censored and Box-Cox quantile regressions. The implementation of the proposed method is illustrated using a well-known dataset.

The Asymmetric Effect of Endowments on Vertical Intra-Industrial Trade

This paper investigates the determinants of Spanish vertical intra-industrytrade with a large sample of countries. We empirically test the comparative advantageexplanation. For this aim, we build physical, human and technologicalcapital stocks. On average, when using OLS techniques, differences in endowmentsare a limitation for vertical intra-industry trade. Using quantile regressionstechniques, we observe that this negative effect decreases in absolute terms asvertical intra-industry trade flows increase and, in some cases, become positivefor the upper tails, thus supporting the view of a reduced version of the comparativeadvantage explanation. Este artículo trata de analizar los determinantes del comercio intra-industrialvertical en Espña con una muestra de países extensa. Se contrasta empíricamentela hipóteis de la ventaja comparativa. Con esta finalidad, hemos construido seriesde capital físico, humano y tecnológico. En media, cuando se utiliza la estimaciónMCO, las diferencias en dotaciones suponen una limitación al comercio intraindustrialvertical. Usando la técnica de regresion por cuantiles, se observa queeste efecto negativo disminuye, en términos absolutos, a medida que los flujos decomercio intra-industrial vertical se incrementan y, en algunos casos, llegan a serpositivos en los cuantiles altos de la distribución. Este resultado ofrece evidenciaa favor de una versión reducida de la hipótesis de la ventaja comparativa.Comercio Intra-industrial, Ventaja Comparativa, Diferenciación Vertical, Stocks de Capital, Regresión Quantilica. Comparative Advantage, Vertical Differentiation, Capital Stocks, Quantile Regressions.

Quantiles, corners, and the extensive margin of trade

We develop a simple method for the estimation of quantile regressions for corner solutions data (i.e., fully observed non-negative data that have a mixed distribution with a mass-point at zero), focusing particular attention on the case where the domain of the variate of interest is bounded both from below and from above. We use the proposed method to study the determinants of the extensive margin of trade and find that most regressors have very different impacts on different parts of the distribution

Analyzing aggregate real exchange rate persistence through the lens of sectoral data.

In this paper we analyze the persistence of aggregate real exchange rates (RERs) for a group of EU-15 countries by using sectoral data. The tight relation between aggregate and sectoral persistence recently investigated by Mayoral (2008) allows us to decompose aggregate RER persistence into the persistence of its different subcomponents. We show that the distribution of sectoral persistence is highly heterogeneous and very skewed to the right, and that a limited number of sectors are responsible for the high levels of persistence observed at the aggregate level. We use quantile regression to investigate whether the traditional theories proposed to account for the slow reversion to parity (lack of arbitrage due to nontradibilities or imperfect competition and price stickiness) are able to explain the behavior of the upper quantiles of sectoral persistence. We conclude that pricing to market in the intermediate goods sector together with price stickiness have more explanatory power than variables related to the tradability of the goods or their inputs.PPP puzzle, real exchange rates, persistence, heterogeneous dynamics, aggregation bias, nontradability, imperfect competition, pricing-to-market.

Network and Panel Quantile Effects Via Distribution Regression

This paper provides a method to construct simultaneous confidence bands for quantile functions and quantile effects in nonlinear network and panel models with unobserved two-way effects, strictly exogenous covariates, and possibly discrete outcome variables. The method is based upon projection of simultaneous confidence bands for distribution functions constructed from fixed effects distribution regression estimators. These fixed effects estimators are debiased to deal with the incidental parameter problem. Under asymptotic sequences where both dimensions of the data set grow at the same rate, the confidence bands for the quantile functions and effects have correct joint coverage in large samples. An empirical application to gravity models of trade illustrates the applicability of the methods to network data.Comment: 71 pages, 8 figures, 3 tables, includes supplementary appendi

Maximum-likelihood estimation of lithospheric flexural rigidity, initial-loading fraction, and load correlation, under isotropy

Topography and gravity are geophysical fields whose joint statistical structure derives from interface-loading processes modulated by the underlying mechanics of isostatic and flexural compensation in the shallow lithosphere. Under this dual statistical-mechanistic viewpoint an estimation problem can be formulated where the knowns are topography and gravity and the principal unknown the elastic flexural rigidity of the lithosphere. In the guise of an equivalent "effective elastic thickness", this important, geographically varying, structural parameter has been the subject of many interpretative studies, but precisely how well it is known or how best it can be found from the data, abundant nonetheless, has remained contentious and unresolved throughout the last few decades of dedicated study. The popular methods whereby admittance or coherence, both spectral measures of the relation between gravity and topography, are inverted for the flexural rigidity, have revealed themselves to have insufficient power to independently constrain both it and the additional unknown initial-loading fraction and load-correlation fac- tors, respectively. Solving this extremely ill-posed inversion problem leads to non-uniqueness and is further complicated by practical considerations such as the choice of regularizing data tapers to render the analysis sufficiently selective both in the spatial and spectral domains. Here, we rewrite the problem in a form amenable to maximum-likelihood estimation theory, which we show yields unbiased, minimum-variance estimates of flexural rigidity, initial-loading frac- tion and load correlation, each of those separably resolved with little a posteriori correlation between their estimates. We are also able to separately characterize the isotropic spectral shape of the initial loading processes.Comment: 41 pages, 13 figures, accepted for publication by Geophysical Journal Internationa