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CEP discussion paper
Further Simulation Evidence on the Performance of the Poisson Pseudo-Maximum Likelihood Estimator
João Santos Silva and Silvana Tenreyro May 2009
Paper No' CEPDP0933:
Full Paper (pdf)

JEL Classification: C13; C50; F10

Tags: gravity equation; heteroskedasticity; jensen's inequality

We extend the simulation results given in Santos-Silva and Tenreyro (2006, ‘The Log of Gravity’, The Review of Economics and Statistics, 88, pp.641-658) by considering data generated as a finite mixture of gamma variates. Data generated in this way can naturally have a large proportion of zeros and is fully compatible with constant elasticity models such as the gravity equation. Our results confirm that the Poisson pseudo maximum likelihood estimator is generally well behaved.