Simonovska, Ina and Waugh, Michael E. (2010) The elasticity of trade : estimates and evidence. Working Paper. Coventry: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2010 (Number 13).

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Abstract

Quantitative results from a large class of structural gravity models of international trade depend critically on a single parameter governing the elasticity of trade with respect to trade frictions. We provide a new method to estimate this elasticity and illustrate the merits of our approach relative to the estimation strategy of Eaton and Kortum (2002). We employ this method on data for 123 developed and developing countries for the year 2004 using new disaggregate price and trade flow data. Our benchmark estimate for all countries is approximately 4.5, nearly 50 percent lower than the alternative estimation strategy would suggest. This difference implies a doubling of the measured welfare costs of autarky across a large class of widely used trade models.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	International trade, International trade -- Econometric models, Prices, Free trade -- Economic aspects
Series Name:	CAGE Online Working Paper Series
Publisher:	Department of Economics, University of Warwick
Place of Publication:	Coventry
Official Date:	June 2010
Dates:	Date Event June 2010 Published
Date of first compliant deposit:	1 August 2016
Volume:	Volume 2010
Number:	Number 13
Number of Pages:	39
Status:	Not Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
Funder:	World Bank

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