Quantcast
Channel: Statalist
Viewing all articles
Browse latest Browse all 72762

Gravity Model: How to predict TOTAL VALUE of dependent variable from a log-log regression

$
0
0
Whilst I understand that a log-log gravity equation is the ELASTICITY of Y in relation to X, I am attempting to immotate British Treasury methodology in order to calculate the border effect between an Independent Scotland and Rest of UK.

The Treasury claims to derive the border effect from the Treasury's own log-log model, BUT the border effect is measured thus = 1-(Predicted TOTAL Value of Exports/Actual TOTAL Value of Exports). (For example; predicted Total Exports for (year) = £4.5-.5.5bn/ Actual Total Exports 2002-2011= £32bn ) therefore border effect = 1-(4.5/32)=0.86=86% border effect.

IN OTHER WORDS the Treasury claims to derive the TOTAL VALUE OF EXPORTS from its double-log/log-log gravity equation.

MY QUESTION IS: How can one predict the TOTAL (I emphasise "TOTAL") VALUE OF EXPORTS from the log-log model which only measures logarithmic change/elasticity? Or put otherwise; How can the Treasury interpret the below model (lnExports = lnGDP(A) + lnGDP(B) + lnDist _Dummy(CommonLangiage)) to PREDICT TOTAL TRADE VOLUME?

"The estimated effects of each characteristic are then applied to Scotland and the rest of the UK (given their size, proximity and common language) to calculate what trade flows"

Array


Viewing all articles
Browse latest Browse all 72762

Trending Articles



<script src="https://jsc.adskeeper.com/r/s/rssing.com.1596347.js" async> </script>