Hello,
I am currently estimating a standard gravity model to estimate the effect of trade agreements on trade follows using importer and exporter-year fixed effects to account for the multilateral resistance term, and dyadic fixed effect to account for unobserved time-invariant heterogeneity. The implementation looks like this.
Code:
use "http://fmwww.bc.edu/RePEc/bocode/e/EXAMPLE_TRADE_FTA_DATA" if category=="TOTAL", clear 
 * create my fixed effects cap egen imp = group(isoimp) cap egen exp = group(isoexp) * run the model ppmlhdfe trade fta, absorb(imp#year exp#year imp#exp) cluster(imp#exp)
Some recent articles (e.g. Bergstrand et al. 2015) suggested to interact bilateral fixed effects with a trend term. This allows to account for trends over time in the effects of unobserved bilateral heterogeneity. I would like to use a similar approach but I am not sure about how it is correctly implemented using the ppmlhdfe command. I have tried the following but it is not working. I fear that it is putting a dyad-time fixed effect rather than interacting my dyad fixed effect by the time trend. [CODE] * create my diadic dummies cap egen impexp = group(isoexp isoimp) * estimate the model ppmlhdfe trade fta, absorb(imp#year exp#year impexp#year) cluster(imp#exp) insufficient observations [CODE] Does anyone know how I could estimate this? thanks a lot in advance