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Armington Elasticities: Estimates for Uruguayan Manufacturing Sectors

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Author Info

  • Manuel Flores

    ()
    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Adriana Cassoni

    ()
    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

Armington elasticities of substitution – AEs – are a crucial set of parameters that allows CGEMs applied to trade to be operational. In the case of Uruguay, no estimated values for these parameters have been available until now, forcing researchers to impose them arbitrarily. We here start filling this gap by providing estimated AEs for 32 Uruguayan 4-digit manufacturing industries belonging to the Food, Beverages and Tobacco; Chemical Products; and Textiles economic sectors, using monthly and quarterly data along 1989-2001. The specification of the models follows the simplified benchmark proposed by Armington (1969) that has been used in most of the existing applied research. The resulting estimated AEs are in line with those reported by the international literature and hence of a smaller size than expected by CGEM modellers. Our econometric analyses also show that the low values of the estimated elasticities are not due to the characteristics of the available data and/or the methodology used. Instead, a plausible explanation suggested by our results relates to the theoretical models used being misspecified, particularly due to the omission of relevant variables.

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File URL: http://www.fcs.edu.uy/archivos/0710.pdf
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Bibliographic Info

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0710.

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Length: 25 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:ude:wpaper:0710

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Keywords: Armington elasticity; Substitutability; Computable General Equilibrium Model.;

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Cited by:
  1. Cecilia Llambi & Silvia Laens & Marcelo Perera & Mery Ferrando, 2011. "Assessing the Impact of the 2007 Tax Reform on Povert and Inequality in Uruguay," Working Papers PMMA 2011-14, PEP-PMMA.

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