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Global production sharing and the measurement of price elasticities in international trade

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  • Prema-chandra Athukorala
  • Fahad Hassan Khan

Abstract

This paper examines the implications of global production sharing for the measurement of price elasticities in international trade using a unique disaggregated dataset relating to US manufacturing imports. It is found that imports of parts and components are remarkably less sensitive to changes in relative prices and, consequently, the sensitivity of aggregate trade flows to relative prices tends to diminish as trade cuts ever more rapidly into the production process. This finding casts doubt on the validity of the conventional approach to trade flow modeling which lumps together parts and components and final goods as a homogeneous product.

Suggested Citation

  • Prema-chandra Athukorala & Fahad Hassan Khan, 2014. "Global production sharing and the measurement of price elasticities in international trade," Departmental Working Papers 2014-22, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2014-22
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2014/wp_econ_2014_22.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kornkarun Cheewatrakoolpong & Somprawin Manprasert, 2015. "Trade Diversification and Crisis Transmission: A Case Study of Thailand," Asian Economic Journal, East Asian Economic Association, vol. 29(4), pages 385-408, December.

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    More about this item

    Keywords

    global production sharing; trade elasticities; import demand function;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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