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Import Demand Elasticities and Trade Distortions

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  • Hiau Looi Kee

    (The Development Research Group of the World Bank.)

  • Alessandro Nicita

    (The Development Research Group of the World Bank. Nicita is also affiliated with UNCTAD in Geneva.)

  • Marcelo Olarreaga

    (The Development Research Group of the World Bank. Olarreaga is also affiliated with the University of Geneva, and CEPR in London.)

Abstract

This paper provides a systematic estimation of import demand elasticities for a broad group of countries at a very disaggregated level of product detail. We use a semiflexible translog GDP function approach to formally derive import demands and their elasticities, which are estimated with data on prices and endowments. Within a theoretically consistent framework, we use the estimated elasticities to construct Feenstra's (1995) simplification of Anderson and Neary's trade restrictiveness index (TRI). The difference between TRIs and import-weighted tariffs is shown to depend on the tariff variance and the covariance between tariffs and import demand elasticities. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 4 (November)
Pages: 666-682

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Handle: RePEc:tpr:restat:v:90:y:2008:i:4:p:666-682

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  1. Anderson, James E & Neary, J Peter, 1998. "The Mercantilist Index of Trade Policy," CEPR Discussion Papers 2044, C.E.P.R. Discussion Papers.
  2. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  3. James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
  4. Shah, Shekhar & Mishra, Deepak & Panagariya, Arvind, 1996. "Demand elasticities in international trade : are they really low?," Policy Research Working Paper Series 1712, The World Bank.
  5. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
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  7. J Anderson & J.P. Neary, 1994. "Measuring the Restrictiveness of Trade Policy," CEP Discussion Papers dp0186, Centre for Economic Performance, LSE.
  8. Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Department of Economics 95-10, California Davis - Department of Economics.
  9. Athukorala, Premachandra & Riedel, James, 1994. "Demand and Supply Factors in the Determination of NIE Exports: A Simultaneous Error-Correction Model for Hong Kong: A Comment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1411-14, November.
  10. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
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  12. Marquez, Jaime, 1999. "Long-Period Trade Elasticities for Canada, Japan, and the United States," Review of International Economics, Wiley Blackwell, vol. 7(1), pages 102-16, February.
  13. James E Anderson & J Peter Neary, 2004. "Welfare versus Market Access - The Implications of Tariff Structure for Tariff Reform," Working Papers 200423, School Of Economics, University College Dublin.
  14. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  15. Riedel, James, 1988. "The Demand for LDC Exports of Manufactures: Estimates from Hong Kong," Economic Journal, Royal Economic Society, vol. 98(389), pages 138-48, March.
  16. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
  17. Winters, L. Alan, 1984. "Separability and the specification of foreign trade functions," Journal of International Economics, Elsevier, vol. 17(3-4), pages 239-263, November.
  18. Gallaway, Michael P. & McDaniel, Christine A. & Rivera, Sandra A., 2003. "Short-run and long-run industry-level estimates of U.S. Armington elasticities," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 49-68, March.
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