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Measuring the price elasticity of import demand in the destination markets of Italian exports

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  • Alberto Felettigh

    ()
    (Bank of Italy)

  • Stefano Federico

    ()
    (Bank of Italy)

Abstract

The aim of this paper is to compare the price elasticity of import demand in the destination markets of Italian exports to the price elasticity in the destination markets of the other main euro-area countries' exports. To this end, we use the elasticities of substitution across varieties estimated for each destination market (defined as a country-product combination) by Broda, Greenfield and Weinstein (2006). We find that Italy exports to markets which have, on average, a lower price elasticity than the markets where France, Germany and Spain sell their exports. The result is mainly driven by the motor vehicle and other transport equipment sectors. Net of these two industries, the export elasticities of the four countries are basically identical. The sectoral and geographical composition of Italian exports therefore does not seem to expose them to a relatively more elastic demand, contrary to the indications of part of the literature.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 776.

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Date of creation: Oct 2010
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Handle: RePEc:bdi:wptemi:td_776_10

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Keywords: exports; elasticity of substitution; Armington varieties; international specialization; price elasticity of exports;

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Cited by:
  1. Sónia Cabral & Cristina Manteu, 2011. "The price elasticity of external demand: how does Portugal compare with other euro area countries?," Working Papers w201127, Banco de Portugal, Economics and Research Department.
  2. Oliver Holtemöller & Götz Zeddies, 2013. "Has the Euro increased international price elasticities?," Empirica, Springer, vol. 40(1), pages 197-214, February.
  3. Giorgia Giovannetti & Marco Sanfilippo, 2013. "China's Competition and the Export Price Strategies of Developed Countries," Working Papers - Economics wp2013_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  4. Donatella Baiardi & Carluccio Bianchi & Eleonora Lorenzini, 2013. "The Clothing Export Performance and Prospects for Advanced and Emerging Economies: Evidence from a Panel Data Analysis (new version)," DEM Working Papers Series 040, University of Pavia, Department of Economics and Management.
  5. Sónia Cabral & Cristina Manteu, 2013. "The price elasticity of external demand of Portuguese exports: a comparison with other euro area countries," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  6. Donatella Baiardi & Carluccio Bianchi & Eleonora Lorenzini, 2013. "The Clothing Export Performance and Prospects for Advanced and Emerging Economies: Evidence from a Panel Data Analysis," DEM Working Papers Series 038, University of Pavia, Department of Economics and Management.

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