Hello everyone,
I'm working on a gravity model where it is not possible to apply exporter and importer fixed effects since I realized that both exporter and importer fixed effects always surpass the number of observations. This situation arises when the observations are essentially the exports of one country to the world, and the exports of the world to that country, meaning the number of pairs equals the number of world countries.
In this context, is it correct to apply pair fixed effects, remoteness indexes (to control for multilateral resistance terms), and year fixed effects in the same regression?
I would appreciate any guidance you can offer. Thanks in advance.
I'm working on a gravity model where it is not possible to apply exporter and importer fixed effects since I realized that both exporter and importer fixed effects always surpass the number of observations. This situation arises when the observations are essentially the exports of one country to the world, and the exports of the world to that country, meaning the number of pairs equals the number of world countries.
In this context, is it correct to apply pair fixed effects, remoteness indexes (to control for multilateral resistance terms), and year fixed effects in the same regression?
I would appreciate any guidance you can offer. Thanks in advance.
