Work

The Elasticity of Trade: Estimates and Evidence

Year: 2011

Type: report

Abstract: Quantitative results from a large class of structural gravity models of international trade depend critically on the elasticity of trade with respect to trade frictions.We develop a new simulated method of moments estimator to estimate this elasticity from disaggregate price and trade-flow data and we use it within Eaton and Kortum's (2002) Ricardian model.We apply our estimator to disaggregate price and trade-flow data for 123 countries in the year 2004.Our method yields a trade elasticity of roughly four, nearly fifty percent lower than Eaton and Kortum's (2002) approach.This difference doubles the welfare gains from international trade.

Source: National Bureau of Economic Research

DOI: 10.3386/w16796

Authors: Ina Simonovska, Michael Waugh

Institutions: National Bureau of Economic Research, Federal Reserve Bank of San Francisco, University of California San Diego, New York University, University of California, Davis, University of California, Berkeley

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3123374598

Cites: 59

Cited by: 57

Related to: 10