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A Practical Approach to Estimating Sector-Level Substitution Elasticities with PPML

Year: 2025

Type: article

Abstract: In this paper, we provide a practical approach to estimating the elasticity of substitution by sector using a PPML estimator, building on the methodology described in Riker (2020). The method is illustrated by estimating elasticities for NAICS 3-digit and 6-digit manufacturing sectors. The PPML estimates are compared with estimates produced using OLS and across different levels of aggregation in the data. We find that the PPML estimator tends to produce elasticity estimates that are larger and have greater variability than the OLS estimates.

Source: Staff Working Papers: U.S. International Trade Commission

DOI: 10.71476/cc4m-0n68

Author: Schreiber, Samantha

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W6921399624

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