Gravity model of trade with linear quantile mixed models approach

Abstract

© Springer International Publishing AG 2017. The Thai economy has mostly depended on exports, which has significantly declined in recent years. Hence, this paper is to investigate the determinants affecting Thailands exports with its top ten trading partners by using gravity model approach along with panel data. In panel data, there are different characteristics between entities that account for unobserved individual effects. Previous studies have only focused on estimating mean effect. Mixed models are relatively selected as additional approach for panel data that accounts for individual heterogeneity in terms of variance components. Another advantage is that they are suitable for dependent data which are likely to be similar as collected repeatedly on the same country. We also take an interest in studying different magnitudes and directions of the effects of determinants on different parts of the distribution of export values. Meanwhile, Quantile regression (QR) allows study of different quantiles of the conditional distribution. In this study we combine the benefits of both mixed effects and quantile estimator to study Thai exports and employ linear quantile mixed models (LQMMs) with gravity model.