A Discussion on Armington Trade Substitution Elasticities
AbstractApplied 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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Bibliographic InfoPaper provided by United States International Trade Commission, Office of Economics in its series Working Papers with number 15856.
Date of creation: 2002
Date of revision:
Other versions of this item:
- Christine A. McDaniel & Edward J. Balistreri, 2003. "A Discussion on Armington Trade Substitution Elasticities," Computational Economics 0303002, EconWPA.
- F1 - International Economics - - Trade
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
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