Import price elasticities: reconsidering the evidence
AbstractRecent economic geography and trade empirical studies based on monopolistic competition suggest high levels of trade price elasticities (between 3 and 11). However, price elasticity estimations in trade equations using unit values as price proxies usually lead to lower values of around unity. We show that those inconclusive results may be due to some misspecification in these equations as well as measurement errors in prices. When suitable instrumental variables are used, within a panel of industrialized countries, we obtain high price elasticities, the majority ranging from 1 to 13. The highest estimates correspond to industries producing homogeneous goods.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 35 (2002)
Issue (Month): 2 (May)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Other versions of this item:
- Helene Erkel-Rousse & Daniel Mirza, 2000. "Import Price-Elastcities: Reconsidering the Evidence," Econometric Society World Congress 2000 Contributed Papers 0909, Econometric Society.
- Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie MathÃÂ©matique et Applications 2000.52, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- F1 - International Economics - - Trade
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