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It is a bilateral model. Country fixed effects are dummies for all the origin countries that migrate to the country I am analysing.
The struggle is that as soon as I add population variables, the corresponding coefficients of these demographic variables are really high and make the model explosive. This happens namely for the demographic variables that refer to the destination country that I'm analysing. I'm thinking there might be collinearity issues. I need to get an insight on this since it's really important for my research...Thanks again.
My fear is that these fixed effects have really high coefficients compared to the rest of the time-varying variables of my model. This might be contributing to the explosive predictions. Would you have any suggestions on how to tackle this?
If I understand you correctly, the country dummies are highly collinear with the country characteristics and with the lagged migration, so this is likely to result in a very unstable model. If your country variables do not vary over time they are perfectly collinear with the fixed effects and should be excluded; make sure you are not falling into that trap.
Thanks Joao. Just a fundamental question: can PPML be used when the dependent variable is a rate? I'm using it for a gravity model where the dependent variable is the flow of migrants divided by the lagged population of origin.
I wanted to ask you which gravity model should I run to estimate the impact of on FDI based on the counterfactual of full liberalization? should I first need to obtain predicted values from a gravity model on a sector where there is full liberalization already and then apply to other sectors?
I am running PPML but my dependent variable is not exports. It is Co2 emission. Does PPML work in this case? However, I got the notification: "co2 not a valid estimator". Why it happens and how I can solve it? Co2 values are nonnegative.
Many thanks,
Huong
Regarding to the use of PPML for gravity model, and as I have mentioned in other discussion groups, I am doing a gravity model for Nicaragua.
I have a question. When I apply PPML and remoteness variables for the exporting and importing country, I am not sure about the sign of the remoteness variables.
For thhe exporting remoteness variable I get this is negative related with the agriculutural exports of Nicaragua.
Shoul I worry about this? or these variables are only for control. Besides of that, I got the signs expected for the variables of interest.
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