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Supply Capacity, Vertical Specialization and Tariff Rates: The Implications for Aggregate U.S. Trade Flow Equations

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  • Menzie D. Chinn

Abstract

This paper re-examines aggregate and disaggregate import and export demand functions for the United States. This re-examination is warranted because (1) income elasticities are too high to be warranted by standard theories, and (2) remain high even when it is assumed that supply factors are important. These findings suggest that the standard models omit important factors. An empirical investigation indicates that the rising importance of vertical specialization combined with decreasing tariffs rates explains some of results. Accounting for these factors yields more plausible estimates of income elasticities, as well as smaller prediction errors.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11719.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11719

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Cited by:
  1. Ines Buono & Filippo Vergara Caffarelli, 2013. "Trade elasticity and vertical specialisation," Temi di discussione (Economic working papers) 924, Bank of Italy, Economic Research and International Relations Area.
  2. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009. "China's Current Account and Exchange Rate," CESifo Working Paper Series 2587, CESifo Group Munich.
  3. Rahman, Mizanur, 2008. "The Impact of a Common Currency on East Asian Production Networks and China’s Exports Behavior," MPRA Paper 13931, University Library of Munich, Germany.

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