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Estimating price elasticities of food trade functions: How relevant is the gravity approach?

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Femenia, Fabienne
Gohin, Alexandre

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Abstract

The main objective of the paper is related to the long standing issue of the econometric estimation of price elasticity of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, CES preferences. We test all these assumptions using European intra trade of cheese. In a general way, all assumptions made on preferences by the gravity approach are not supported by our data set. The bias induced on the estimated price elasticities is not univocal.

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Paper provided by TRADEAG - Agricultural Trade Agreements in its series Working Papers with number 7211.

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Date of creation: 2007
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Handle: RePEc:ags:tragwp:7211

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Keywords: Elasticities; Trade; Generalized Maximum Entropy; Censored demand system; International Relations/Trade;

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Cited by:
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  1. Alexandre Gohin, 2008. "La sélection des produits agricoles sensibles : le cas européen," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 87(2), pages 49-76. [Downloadable!]
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