Hi,

For my thesis I am intending to estimate a gravity model, looking at specifically the effect of the SAFTA trade agreement on trade in agri-food products.I would like to be able to estimate the level of trade creation and trade diversion occuring. I have a few specific questions I am hoping can be answered on this forum, and also looking for any advice you may have in regard to this study.

Some questions...
1. The dataset I have formed only contains import data, would it be meaningful to do the same study using export data, can i expect the results to be different? it took quite a while to create the import data set so would like to know before I spend time creating on for export data...

2. I first started with a simplified estimation...

. ppml foodimports ln_dist ln_gdp1 ln_gdp2

note: checking the existence of the estimates
WARNING: foodimports has very large values, consider rescaling
WARNING: ln_dist has very large values, consider rescaling or recentering
WARNING: ln_gdp1 has very large values, consider rescaling or recentering
WARNING: ln_gdp2 has very large values, consider rescaling or recentering

Number of regressors excluded to ensure that the estimates exist: 0
Number of observations excluded: 0

note: starting ppml estimation
note: foodimports has noninteger values

Iteration 1: deviance = 1.32e+11
Iteration 2: deviance = 1.10e+11
Iteration 3: deviance = 1.07e+11
Iteration 4: deviance = 1.07e+11
Iteration 5: deviance = 1.07e+11
Iteration 6: deviance = 1.07e+11
Iteration 7: deviance = 1.07e+11
Iteration 8: deviance = 1.07e+11
Iteration 9: deviance = 1.07e+11
Iteration 10: deviance = 1.07e+11

Number of parameters: 4
Number of observations: 418761
Pseudo log-likelihood: -5.361e+10
R-squared: 6.988e-08
Option strict is: off

Robust
foodimports Coef. Std. Err. z P>z [95% Conf. Interval]

ln_dist -1.85e-20 7.07e-23 -261.78 0.000 -1.87e-20 -1.84e-20
ln_gdp1 7.27e-07 1.47e-06 0.49 0.621 -2.15e-06 3.61e-06
ln_gdp2 -2.34e-20 5.44e-23 -430.94 0.000 -2.35e-20 -2.33e-20
_cons 10.71151 .0123599 866.64 0.000 10.68729 10.73574


magnitude of coefficients are very small as is the R squared, i assume this is because i havent used fixed effects, and/or many variables.
when i do include some more variables, for example a couple of different trade agreement dummies, the level of iterations goes behind 50, at which point I cancel the estimation because it is taking too long. Is this usual and i should be patient, or is something wrong with my estimation?

ppml foodimports ln_dist ln_gdp1 ln_gdp2 comesa nafta safta

note: checking the existence of the estimates
WARNING: foodimports has very large values, consider rescaling
WARNING: ln_dist has very large values, consider rescaling or recentering
WARNING: ln_gdp1 has very large values, consider rescaling or recentering
WARNING: ln_gdp2 has very large values, consider rescaling or recentering
WARNING: comesa has very large values, consider rescaling or recentering
WARNING: nafta has very large values, consider rescaling or recentering
WARNING: safta has very large values, consider rescaling or recentering

Number of regressors excluded to ensure that the estimates exist: 0
Number of observations excluded: 0

note: starting ppml estimation
note: foodimports has noninteger values

Iteration 1: deviance = 1.02e+36
Iteration 2: deviance = 3.75e+35
Iteration 3: deviance = 1.38e+35
Iteration 4: deviance = 5.08e+34
Iteration 5: deviance = 1.87e+34
Iteration 6: deviance = 6.88e+33
CONTINUES FOREVER....


3. I would also like to control for country fixed effects, using the code:

. egen exporter = group (iso_o)
(32735 missing values generated)

. egen importer = group (iso_d)
(77313 missing values generated)

. ppml foodimports ln_dist ln_gdp1 ln_gdp2 i.exporter i.importer
factor variables and time-series operators not allowed
r(101);

I am unsure why this occurs.

4. which method is best to control for country fixed effects, and is it necessary to include time fixed effects, and country pair fixed effects? i am using a panel data set

5. please suggest to me any other advice on things I should consider in order to find some reliable results in my study!

Thank you very much in advance, Any help is greatly appreciated
Megan