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A Discussion on Armington Trade Substitution Elasticities

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Author Info
McDaniel, Christine A.
Balistreri, Edward J.

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Abstract

Applied partial and general equilibrium models used to examine trade policy are almost universally sensitive to trade elasticities. Indeed, the Armington elasticity, the degree of substitution between domestic and imported goods, is a key behavioral parameter that drives the quantitative, and sometimes the qualitative, results that policymakers use. While standard transparent approaches to econometric estimation of these elasticities have been offered for the last 30 years, the estimates are viewed as too small by many trade economists. A few robust findings emerge from the econometric literature: (1) more disaggregate analyses find higher elasticities, (2) long-run estimates are higher than short-run estimates, and (3) time series analyses generally find lower elasticities relative to cross-sectional studies. We offer simulation results to illustrate the sensitivity of general equilibrium models to Armington elasticites. We conclude with remarks on the current challenges that remain in determining these important parameters.

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Paper provided by United States International Trade Commission, Office of Economics in its series Working Papers with number 15856.

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Date of creation: 2002
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Handle: RePEc:ags:uitcoe:15856

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Keywords: International Relations/Trade;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May. [Downloadable!] (restricted)
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  2. Clinton R. Shiells & Kenneth A. Reinert, 1993. "Armington Models and Terms-of-Trade Effects: Some Econometric Evidence for North America," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 299-316, May. [Downloadable!] (restricted)
  3. Reinert, Kenneth A. & Roland-Holst, David W., 1992. "Armington elasticities for United States manufacturing sectors," Journal of Policy Modeling, Elsevier, vol. 14(5), pages 631-639, October. [Downloadable!] (restricted)
  4. Harrison, Glenn W. & Jones, Richard & Kimbell, Larry J. & Wigle, Randal, 1993. "How robust is applied general equilibrium analysis?," Journal of Policy Modeling, Elsevier, vol. 15(1), pages 99-115, February. [Downloadable!] (restricted)
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  7. Brown, D.K., 1992. "The Impact of a North American Free Trade Area: Applied General Equilibrium Models," Working Papers 311, Research Seminar in International Economics, University of Michigan.
  8. repec:fth:michin:311 is not listed on IDEAS
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  11. Liu, Jing & Channing Arndt & Thomas Hertel, 2003. "Parameter Estimation and Measures of Fit in A Global, General Equilibrium Model," GTAP Working Papers 1200, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
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  13. Dawkins, Christina & Srinivasan, T.N. & Whalley, John, 2001. "Calibration," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 58, pages 3653-3703 Elsevier. [Downloadable!] (restricted)
  14. Bruce A. Blonigen & Wesley W. Wilson, 1999. "Explaining Armington: What Determines Substitutability Between Home and Foreign Goods?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 1-21, February. [Downloadable!] (restricted)
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  1. Yilmazkuday, Hakan, 2009. "Is the Armington Elasticity Really Constant across Importers?," MPRA Paper 15954, University Library of Munich, Germany. [Downloadable!]
  2. Serban S. Scrieciu, 2004. "Assessing the Economic Impacts of Incorporating Romania's Agricultural and Food Sectors into EU's Customs Union: an Applied General Equilibrium Approach," Computational Economics 0410004, EconWPA. [Downloadable!]
    Other versions:
  3. Kristina Toming, 2006. "The Price Impact Of Adopting The Common Agricultural Policy In Estonia: Estimated Versus Actual Effects," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 45, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  4. Scrieciu, S. Serban, 2004. "Assessing the Economic Impacts of Incorporating Romania's Agricultural and Food Sectors into EU's Customs Union: An Applied General Equilibrium Approach," Impact Assessment Research Centre (IARC) Working Papers 30583, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  5. Ivanova Nadezhda, 2005. "Estimation of own- and cross-price elasticities of disaggregated imported and domestic goods in Russia," EERC Working Paper Series 05-13e, EERC Research Network, Russia and CIS. [Downloadable!]
  6. Lopez, Rigoberto A. & Matschke, Xenia, 2005. "Food Protection for Sale," Research Reports 25195, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
    Other versions:
  7. Michał Gradzewicz & Krzysztof Makarski, 2009. "The Macroeconomic Effects of Losing Autonomous Monetary Policy after the Euro Adoption in Poland," National Bank of Poland Working Papers 58, National Bank of Poland, Economic Institute. [Downloadable!]
  8. Weingarten, Peter & Frohberg, Klaus & Winter, Etti & Schreiber, Catrin, 2003. "Quantitative Analysis Of The Impacts Of Croatiaâ´S Agricultural Trade Policy On The Agri-Food Sector," IAMO Discussion Papers 14932, Institute of Agricultural Development in Central and Eastern Europe (IAMO). [Downloadable!]
  9. Jorge Chami Batista & Nelson Isaac Abrahão Junior, 2005. "Aggregation Problems in Estimates of Armington Elasticities and Pass-Through Effects," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 6(2), pages 329-355. [Downloadable!]
  10. González, Manuel & Wong, Sara, 2004. "Elasticidades de Sustitución de Importaciones para Ecuador," MPRA Paper 306, University Library of Munich, Germany, revised May 2005. [Downloadable!]
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