Hi,
I am estimating a gravity model using an unbalanced country-pair panel data set, looking at European countries from 1948-2006, with about 48,000 observations. The dataset is the one used in Head et al (2010) “The erosion of colonial trade linkages after independence”. Anyway, I am looking at the EU membership effect, i.e the gains in trade due to EU membership.
I am struggling to model the intra-EU trade dummys to estimate the EU membership effect. The problem is that European countries joined the EU at multiple dates so that it is difficult to find a single EU membership effect.
How I have gone about coding it so far, with little success, is by generating multiple intra-EU dummy variables and adding new members when new expansions were created. The following is the code I used. (Also, iso_o represents exporter and iso_d is importer, so that the dummys equal to 1 if both the exporter and importer are EU members).
* Original Members
gen intra_EU_1 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX")
replace intra_EU_1 = 0 if year<1964
*
* Original Members + First Expansion ( i.e plus Ireland UK Denmark and Greenland)
gen intra_EU_2 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL")
replace intra_EU_2 = 0 if year<1973
*
* Original Members + First Expansion + Second Expansion (i.e plus Greece)
gen intra_EU_3 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC")
replace intra_EU_3 = 0 if year<1981
*
* Original Members + First Expansion + Second Expansion + Third Expansion (i.e plus Portugal and Spain)
gen intra_EU_4 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC" | iso_o=="PRT" | iso_o=="ESP") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC" | iso_d=="PRT" | iso_d=="ESP")
replace intra_EU_4 = 0 if year<1986
*
* Final Model with all members upto the fourth enlargement (i.e Plus Austria, Sweden and Finland)
gen intra_EU_5 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC" | iso_o=="PRT" | iso_o=="ESP" | iso_o=="AUT" | iso_o=="SWE" | iso_o=="FIN") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC" | iso_d=="PRT" | iso_d=="ESP" |iso_d=="AUT" | iso_d=="SWE" | iso_d=="FIN")
replace intra_EU_5 = 0 if year<1995
Using this method, I gather very confusing results. Some of the intra-EU dummys' coefficients are positive and some are negative. Also, many of the results are insignificant.
I know that studying EU membership has been done many times before, and I was just wondering if anyone could provide me with advice on how to go about generating intra-EU dummy variables.
Thanks, Amran
I am estimating a gravity model using an unbalanced country-pair panel data set, looking at European countries from 1948-2006, with about 48,000 observations. The dataset is the one used in Head et al (2010) “The erosion of colonial trade linkages after independence”. Anyway, I am looking at the EU membership effect, i.e the gains in trade due to EU membership.
I am struggling to model the intra-EU trade dummys to estimate the EU membership effect. The problem is that European countries joined the EU at multiple dates so that it is difficult to find a single EU membership effect.
How I have gone about coding it so far, with little success, is by generating multiple intra-EU dummy variables and adding new members when new expansions were created. The following is the code I used. (Also, iso_o represents exporter and iso_d is importer, so that the dummys equal to 1 if both the exporter and importer are EU members).
* Original Members
gen intra_EU_1 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX")
replace intra_EU_1 = 0 if year<1964
*
* Original Members + First Expansion ( i.e plus Ireland UK Denmark and Greenland)
gen intra_EU_2 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL")
replace intra_EU_2 = 0 if year<1973
*
* Original Members + First Expansion + Second Expansion (i.e plus Greece)
gen intra_EU_3 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC")
replace intra_EU_3 = 0 if year<1981
*
* Original Members + First Expansion + Second Expansion + Third Expansion (i.e plus Portugal and Spain)
gen intra_EU_4 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC" | iso_o=="PRT" | iso_o=="ESP") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC" | iso_d=="PRT" | iso_d=="ESP")
replace intra_EU_4 = 0 if year<1986
*
* Final Model with all members upto the fourth enlargement (i.e Plus Austria, Sweden and Finland)
gen intra_EU_5 = (iso_o=="FRA" | iso_o=="DEU" | iso_o=="ITA" | iso_o=="BEL" | iso_o=="NLD" | iso_o=="LUX" | iso_o=="IRL" | iso_o=="GBR" | iso_o=="DNK" | iso_o=="GRL" | iso_o=="GRC" | iso_o=="PRT" | iso_o=="ESP" | iso_o=="AUT" | iso_o=="SWE" | iso_o=="FIN") & (iso_d=="FRA" | iso_d=="DEU" | iso_d=="ITA" | iso_d=="BEL" | iso_d=="NLD" | iso_d=="LUX" | iso_d=="IRL" | iso_d=="GBR" | iso_d=="DNK" | iso_d=="GRL" | iso_d=="GRC" | iso_d=="PRT" | iso_d=="ESP" |iso_d=="AUT" | iso_d=="SWE" | iso_d=="FIN")
replace intra_EU_5 = 0 if year<1995
Using this method, I gather very confusing results. Some of the intra-EU dummys' coefficients are positive and some are negative. Also, many of the results are insignificant.
I know that studying EU membership has been done many times before, and I was just wondering if anyone could provide me with advice on how to go about generating intra-EU dummy variables.
Thanks, Amran