Trading Partners and Trading Volumes: Implementing the Helpman-Melitz-Rubinstein Model Empirically

Abstract

Helpman, Melitz, and Rubinstein (2008)-HMR-present a rich theoretical model to study the determinants of bilateral trade flows across countries. The model is then empirically implemented through a two-stage estimation procedure. This note seeks to clarify some econometric aspects of the estimation approach used by HMR and explore the consequences of possible departures from the maintained distributional assumptions.Gravity equation, Heteroskedasticity, Jensens inequality