PPML - log of dependent variable

[Ismoil Ismoilov]

Hello Statalist,

I am running the gravity model of trade at the product level.

So first I generated log of exports like this:

gen lnX = ln (X+1)

After that run the ppml with:

xi: ppml lnX ....

Is this approach wrong? Can I use log of dependent variable in PPML and add 1 before generating lnX. Because without 1, stata is giving "dependent variable lnX has negative values".

Or it`s better to run the model without log of dependent variable?

[Joao Santos Silva]

Dear Ismoil Ismoilov,

The main reason to use PPML is that you do not need to take logs of the dependent variable, which can lead to all sorts of problems.

Best wishes,

Joao

[Ismoil Ismoilov]

Dear Ismoil Ismoilov,

The main reason to use PPML is that you do not need to take logs of the dependent variable, which can lead to all sorts of problems.

Best wishes,

Joao

Thank you!