Dear everyone,

I post this because I am confused with bilateral fixed effect estimates:

I estimate the effects of restrictions in services (logistics, banking and transport) on bilateral trade in food goods between 36 OECD countries from 2014-2018 (panel data).
My restrictiveness variables are bilateral and vary by sector and country, but no variation by year for some countries. My dependent variable is sectoral.

I estimate the fixed-effects model (exporter-sectors time, importer-sectors time, and exporter-importer-sector). As independent variables I have my bilateral restrictiveness measures by sector and the FTAij (Free Trade agreement). Through ppml_panel_sg and ppmlhdfe as controls my results are not at all significant.

Other effects when I use the ppml_panel_sg command, no pair with my invariant bilateral cost variables (common language, common border, bilateral distance), my variables become significant.

According to you, should I use the model with bilateral fixed effects or two-step method to construct bilateral trade costs?

Best regards.