Estimation of the Gravity Equation of Bilateral Trade in the Presence of Zero Flows

The gravity model is the workhorse model to describe and explain variation in bilateral trade empirically. Consistent with both Heckscher-Ohlin models and models of imperfect competition and trade, this versatile model has proven to be very successful, explaining a large part of the variance in trade flows. However, the loglinear model cannot straightforwardly account for the occurrence of zero-valued trade flows between pairs of countries. This paper investigates the various approaches suggested to deal with zero flows. Apart from the option to omit the zero flows from the sample, various extensions of Tobit estimation, truncated regression, probit regression and substitutions for zero flows have been suggested. We argue that the choice of method should be based on both economic and econometric considerations. The sample selection model appears to fit both considerations best. Moreover, we show that the choice of method may matter greatly for the results, especially if the fraction of zero flows in the sample is large. In the end, the results surprisingly suggest that the simplest solution, to omit zero flows from the sample, often leads to acceptable results, although the sample selection model is preferred theoretically and econometrically.

Data structures for algebraic manipulation

Imperial Users onl

Distance Decay in International Trade Patterns - a Meta-analysis

Trade costs remain an important barrier to international trade in today’s globalizing economy. Despite the popular discussion on the “death of distance”, distance is still an important source of trade costs and continues to have an irrevocable impact on the patterns of international trade. The literature identifies various factors that can explain the importance of geographical proximity for bilateral trade. First, transport costs and costs of timeliness increase with distance. Moreover, psychic distance increases as well. Because of cultural unfamiliarity and information costs, traders have less knowledge of distant markets. Empirical estimates of the distance effect in trade abound. The evidence indicates that distance still matters for trade. However, differences in estimated effects across the literature make generalizations about the distance effect and its development over time more difficult. This paper performs a meta-analysis of existing empirical studies of bilateral trade, in order to contribute to our understanding of distance decay in trade. Meta-analysis is a statistical analysis of a set of existing empirical results in a specific research area, in order to integrate the findings. It constitutes a quantitative survey of the literature that explicitly addresses the causes of cross-study variation in empirical outcomes. To perform the meta-analysis, a sample of gravity studies was constructed that is as representative as possible. For this purpose, a literature search has been conducted on the Internet, using the Econlit database. Using the search string “trade and/or distance, and gravity, in all fields”, a list of 214 applicable studies has been identified. From this list, 30 studies were randomly selected into the meta-analysis sample. The paper focuses on two key issues. First, it investigates cross-estimate variation in the distance effect according to differences in, e.g., time period concerned, data type used, or empirical specification and estimation method used. Then, we analyse whether the impact of distance has declined over time.

Linking Trade and Transport Statistics: the Dutch Case

International trade flows are important for a trading nation such as the Netherlands. They are an important source of income, value added, and welfare. Trade flows are strongly related to transport flows of goods to and from a country. However, not all international transport flows through a country are registered as merchandize trade flows. For example, transit flows of goods are not recorded in international merchandize trade statistics. Such flows can just as well serve as a basis for value added, though. For example, goods transferred in Rotterdam harbour and transported and distributed by Dutch logistics firms create a basis for value added in services trade. Moreover, transport flows of goods entail costs as well, such as the costs of traffic congestion and environmental pollution. Therefore, it is of interest to have good information on the value and quantities of goods transported through countries, and the modes of transport used for various types of flows. For this purpose, we need integrated statistics on trade flows and transport flows in goods. To be able to match trade and transit flows with transport statistics, complete and plausible information on mode of transport and gross weight is needed. This paper describes the scope and coverage of trade statistics in comparison to transport statistics for the Netherlands. We use transport statistics to allocate the plausible mode of transport to trade and transit flows. Creating an integrated view on trade and transport flows in goods, the paper intends to contribute to an improved understanding of the impact of merchandize trade and transit flows on the economy, both in terms of domestic value added and in terms of potential social costs related to congestion and the emission of pollutants.

Meditation in Medicine: Exploring Complementary and Alternative Methods in Healthcare

The effects of meditation are explored in the context of treatment applied for various maladies. The main concerns look at meditation as a treatment for depression and anxiety. The connection between mind and body is explored and how the connection has been lost throughout the progression of medicine into what we know as Western medicine today. Meditation is an ancient Buddhist practice that can be applied to modem and daily life as a preventative measure for various illnesses. I also explore the impmtance of the way we choose to treat in the context of Jesuit values, specifically that of cura persona/is, or the care of the whole person. The health of the individual is explored on a physical, mental, and spiritual level, as well as the effects it might have on society in a holistic manner

VAT and E-services

Framväxten av elektronisk handel under 1990-talet ansågs av både OECD och EU skapa såväl förutsättningar för stora vinster för företag som stora utmaningar för skattemyndigheterna. Till sin natur är elektronisk handeln global, omedelbar, utan traditionella gränser och genomförs med relativ anonymitet . Dessa aspekter innebär svårigheter för ett traditionellt skattesystem. Enligt sjätte mervärdesskattedirektivet beskattades elektroniska tjänster enligt ursprungslandsprincipen. Detta fick till följd att leverantörer av elektroniska tjänster som inte var etablerade i EU inte omfattades av mervärdesskatt för sina leveranser till kunder inom EU. Samtidigt var leverantörer av elektroniska tjänster som var etablerade inom EU föremål för mervärdesskatt för omsättningar både inom EU och utanför EU vilket skapade en konkurrensnackdel för dem i förhållande till utomeuropeiska leverantörer. För att hantera denna och andra problem som den elektroniska handeln medförde så införde EU särskilda regler för elektroniska tjänster i mervärdesskattedirektivet i början av 2000-talet. I enlighet med dessa så skulle de flesta elektroniska omsättningar, inklusive de som genomfördes av leverantörer etablerade utanför EU, beskattas på destinationsorten . För att underlätta för dessa leverantörer att efterleva sina skatteförpliktelser så infördes en särskild ordning med en kontaktpunkt. Enligt denna särskilda ordning så kan en icke-etablerad leverantör välja att registrera sig för mervärdesskatt i en " identifieringsmedlemsstat " i stället för att behöva registrera sig i varje medlemsstat där denne har kunder. Trots detta så bär leverantörerna en betydande börda i att de är tvungna att lokalisera och identifiera sina kunder, något som har visat sig vara svårt i en digital kontext . Vidare så lider systemet av genomdrivandesvårigheter. Dessa problem kommer sannolikt att förvärras inom den närmaste framtiden eftersom alla elektroniska tjänster ska beskattas på destinationsorten från och med den 1 januari 2015. Även om EU har antagit komplexa tillämpningsföreskrifter för att med större säkerhet kunna lokalisera och identifiera köpare av elektroniska tjänster är det osäkert vilken effekt dessa insatser kommer att ha. Paradoxalt nog kan en teknisk lösning beträffande skatteinsamlingen vara det bästa sättet att lösa dessa ur teknik sprungna problem.The emergence of electronic commerce in the 1990's was acknowledged by both the OECD and the EU to bring about prospects of great profits for businesses as well as huge challenges for fiscal authorities. By its very nature, electronic commerce is global, instantaneous, without traditional borders and conducted with relative anonymity. These aspects make it difficult for a traditional tax system to cope with. Under the Sixth VAT Directive, the EU taxed electronic services at the origin. This had the effect that non-EU suppliers of electronic services were not subject to VAT for their supplies to EU customers while EU e-suppliers were subject VAT, both for intra-community and outbound supplies, creating a competitive disadvantage for them. In order to adjust that distortion and other challenges that electronic commerce brought about, the EU introduced special rules in respect of electronic services into the VAT Directive in the early 2000's. Accordingly, most electronic supplies, including those supplied by non-EU e-suppliers, would be taxed at destination. To ease the compliance burden for these e-suppliers, a single registration scheme was introduced, letting them register in one “Member State of identification” instead of having to register in each Member State where they had customers. Nevertheless, the e-supplier carried a significant compliance burden as they were obliged to locate and identify their customers, something that has proved to be difficult in a digital context. Moreover, the taxation of electronic supplies also suffers from enforcement issues. These issues are likely to worsen in the near future since all electronic services will be taxed at destination as of 1 January 2015. Even though the EU has adopted complex Implementing Regulations in order to, with greater stringency, locate and identify purchasers of electronic services, it is doubtful whether these efforts will have any effects. Paradoxically, a technological solution in respect of the collection mechanism may be the best way to deal with these technology induced issues