Gravity Estimation: Best Practices and Useful Approaches

The gravity model has proven to be an exceptionally successful tool for empirically studying international trade. However, deriving good estimates requires careful consideration of the econometric specification being used. Common applications of the model are prone to a variety of biases and identification challenges that should not be overlooked. This paper describes notable approaches for mitigating these issues and provides guidance on how to produce high quality gravity estimates. It also demonstrates how to implement these techniques in Stata