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Estimating the Effects of Non-discriminatory Trade Policies within Structural Gravity Models

Author

Listed:
  • Benedikt Heid
  • Mario Larch
  • Yoto V. Yoto

Abstract

We propose a simple method to identify the effects of unilateral and non-discriminatory trade policies on bilateral trade within a theoretically-consistent empirical gravity model. Specifi-cally, we argue that structural gravity estimations should be performed with data that include not only international trade flows but also intra-national trade flows. The use of intra-national sales allows identification of the effects of non-discriminatory trade policies on the importer side (e.g. most favored nation tariffs) and on the exporter side (e.g. export subsidies), even in the presence of exporter and importer fixed effects. An important byproduct of our approach is that it can be used to recover estimates of the export-supply elasticity and of the import-demand elasticity. We demonstrate the effectiveness of our techniques in the case of MFN tariffs and “Time to Export” as representative determinants of trade on the importer and on the exporter side, respectively. Our methods can be extended to quantify the impact on trade of any country-specific characteristics as well as any non-trade policies.

Suggested Citation

  • Benedikt Heid & Mario Larch & Yoto V. Yoto, 2017. "Estimating the Effects of Non-discriminatory Trade Policies within Structural Gravity Models," CESifo Working Paper Series 6735, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6735
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    References listed on IDEAS

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    Cited by:

    1. repec:elg:eechap:17028_2 is not listed on IDEAS
    2. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    3. Piermartini, Roberta & Yotov, Yoto, 2016. "Estimating Trade Policy Effects with Structural Gravity," School of Economics Working Paper Series 2016-10, LeBow College of Business, Drexel University.
    4. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters,in: Handbook of International Trade and Transportation, chapter 2, pages 15-78 Edward Elgar Publishing.

    More about this item

    Keywords

    gravity model; non-discriminatory trade policies; tariffs; subsidies; time to export; trade elasticity of substitution;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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