IDEAS home Printed from https://ideas.repec.org/p/cii/cepidt/2019-17.html
   My bibliography  Save this paper

Product-Level Trade Elasticities

Author

Listed:
  • Lionel Fontagné
  • Houssein Guimbard
  • Gianluca Orefice

Abstract

Trade elasticity is a crucial parameter in evaluating the welfare impacts of trade liberalization. We estimate trade elasticities at the product level (6-digit of the Harmonized System comprising more than 5,000 product categories) by exploiting the variation in bilateral applied tariffs for each product category for the universe of available country pairs. This is done by constructing a panel of bilateral applied tariffs and bilateral trade covering the period 2001 to 2016. We address potential endogeneity issues as well as heteroskedasticity and selection bias due to zero flows. The obtained trade elasticities are centered around -5. We finally highlight the differences in the gains from trade arising from considering heterogeneous rather than average trade elasticities. All product level elasticities are made publicly available for sake of scrutiny and use by other researchers.

Suggested Citation

  • Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2019. "Product-Level Trade Elasticities," Working Papers 2019-17, CEPII research center.
    • Handle: RePEc:cii:cepidt:2019-17
    as

    Download full text from publisher

    File URL: http://www.cepii.fr/PDF_PUB/wp/2019/wp2019-17.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
    2. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 865-900.
    3. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    4. Andrew Atkeson & Ariel Burstein, 2008. "Pricing-to-Market, Trade Costs, and International Relative Prices," American Economic Review, American Economic Association, vol. 98(5), pages 1998-2031, December.
    5. Fontagné, Lionel & Martin, Philippe & Orefice, Gianluca, 2018. "The international elasticity puzzle is worse than you think," Journal of International Economics, Elsevier, vol. 115(C), pages 115-129.
    6. Jean Imbs & Isabelle Mejean, 2015. "Elasticity Optimism," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 43-83, July.
    7. Broda, Christian & Greenfield, Joshua & Weinstein, David E., 2017. "From groundnuts to globalization: A structural estimate of trade and growth," Research in Economics, Elsevier, vol. 71(4), pages 759-783.
    8. Anderson, James E. & Yotov, Yoto V., 2016. "Terms of trade and global efficiency effects of free trade agreements, 1990–2002," Journal of International Economics, Elsevier, vol. 99(C), pages 279-298.
    9. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    10. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
    11. repec:hal:spmain:info:hdl:2441/2j87pv5ou185f980qgrpf9net0 is not listed on IDEAS
    12. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
    13. Redding, Stephen & Amiti, Mary & Weinstein, David, 2019. "The impact of the 2018 trade war on U.S. prices and welfare," LSE Research Online Documents on Economics 102619, London School of Economics and Political Science, LSE Library.
    14. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    15. Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.
    16. John Romalis, 2007. "NAFTA's and CUSFTA's Impact on International Trade," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 416-435, August.
    17. Caroline Freund & Emanuel Ornelas, 2010. "Regional Trade Agreements," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 139-166, September.
    18. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    19. repec:hal:spmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    20. Fontagné, Lionel & Orefice, Gianluca, 2018. "Let’s try next door: Technical Barriers to Trade and multi-destination firms," European Economic Review, Elsevier, vol. 101(C), pages 643-663.
    21. Arnaud Costinot & Andrés Rodríguez-Clare, 2018. "The US Gains from Trade: Valuation Using the Demand for Foreign Factor Services," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 3-24, Spring.
    22. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
    23. repec:cii:cepiei:2012-q2-130-5 is not listed on IDEAS
    24. Houssein Guimbard & Sébastien Jean & Mondher Mimouni & Xavier Pichot, 2012. "MAcMap-HS6 2007, an Exhaustive and Consistent Measure of Applied Protection in 2007," International Economics, CEPII research center, issue 130, pages 99-122.
    25. James R. Markusen, 2021. "Putting per-capita income back into trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 10, pages 187-197, World Scientific Publishing Co. Pte. Ltd..
    26. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    27. repec:hal:spmain:info:hdl:2441/3lmdaefcr886ao8sahjmam30ke is not listed on IDEAS
    28. Paolo Bertoletti & Federico Etro & Ina Simonovska, 2018. "International Trade with Indirect Additivity," American Economic Journal: Microeconomics, American Economic Association, vol. 10(2), pages 1-57, May.
    29. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    30. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
    31. Joseph S. Shapiro, 2016. "Trade Costs, CO2, and the Environment," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 220-254, November.
    32. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    33. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    34. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    35. Giri, Rahul & Yi, Kei-Mu & Yilmazkuday, Hakan, 2021. "Gains from trade: Does sectoral heterogeneity matter?," Journal of International Economics, Elsevier, vol. 129(C).
    36. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    37. repec:hal:spmain:info:hdl:2441/nki2gcedn93280ns6fslbhdnm is not listed on IDEAS
    38. repec:hal:pseose:hal-01301577 is not listed on IDEAS
    39. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," Post-Print hal-03579844, HAL.
    40. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The magazine for economic performance 313, Centre for Economic Performance, LSE.
    41. Robert C. Feenstra & Philip Luck & Maurice Obstfeld & Katheryn N. Russ, 2018. "In Search of the Armington Elasticity," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 135-150, March.
    42. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    43. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
    44. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    45. Imbruno, Michele, 2016. "China and WTO liberalization: Imports, tariffs and non-tariff barriers," China Economic Review, Elsevier, vol. 38(C), pages 222-237.
    46. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2008. "Assessing Applied Protection across the World," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 850-863, November.
    47. Ossa, Ralph, 2015. "Why trade matters after all," Journal of International Economics, Elsevier, vol. 97(2), pages 266-277.
    48. Ralph Ossa, 2014. "Trade Wars and Trade Talks with Data," American Economic Review, American Economic Association, vol. 104(12), pages 4104-4146, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yaghoob Jafari & Mihaly Himics & Wolfgang Britz & Jayson Beckman, 2021. "It is all in the details: A bilateral approach for modelling trade agreements at the tariff line," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(3), pages 415-442, September.
    2. Wendkouni Jean‐Baptiste Zongo & Bruno Larue & Carl Gaigné, 2023. "On export duration puzzles," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(2), pages 453-478, March.
    3. Simon Evenett & Matteo Fiorini & Johannes Fritz & Bernard Hoekman & Piotr Lukaszuk & Nadia Rocha & Michele Ruta & Filippo Santi & Anirudh Shingal, 2022. "Trade policy responses to the COVID‐19 pandemic crisis: Evidence from a new data set," The World Economy, Wiley Blackwell, vol. 45(2), pages 342-364, February.
    4. Daniele Curzi & Martijn Huysmans, 2022. "The Impact of Protecting EU Geographical Indications in Trade Agreements," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 364-384, January.
    5. Fontagné, Lionel & Santoni, Gianluca, 2021. "GVCs and the endogenous geography of RTAs," European Economic Review, Elsevier, vol. 132(C).
    6. Zhao, Bei & Yarime, Masaru, 2022. "The impacts of carbon tariffs on international trade flows and carbon emissions: An analysis integrating trade elasticities with an application to US-China trade," Energy Economics, Elsevier, vol. 115(C).
    7. Marco Grassia & Giuseppe Mangioni & Stefano Schiavo & Silvio Traverso, 2020. "(Unintended) Consequences of export restrictions on medical goods during the Covid-19 pandemic," Papers 2007.11941, arXiv.org.
    8. Döbeling, Tatjana & Pelikan, Janine, 2021. "The Market Dynamics of Tariff Rate Quotas in the Case of Ceta," 2021 Conference, August 17-31, 2021, Virtual 315282, International Association of Agricultural Economists.
    9. Amat Adarov & Mahdi Ghodsi, 2021. "The impact of the Eurasian Economic Union–Iran preferential trade agreement on mutual trade at aggregate and sectoral levels," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 125-157, March.
    10. Espitia,Alvaro & Rocha,Nadia & Ruta,Michele, 2020. "Covid-19 and Food Protectionism : The Impact of the Pandemic and Export Restrictions on World Food Markets," Policy Research Working Paper Series 9253, The World Bank.
    11. Jonas Böschemeier & Karsten Mau, 2023. "Foreign Supply Shocks and the Structure of Trade in a Small Open Economy," De Economist, Springer, vol. 171(4), pages 303-342, December.
    12. Aguiar, Angel & Chepeliev, Maksym & Golub, Alla & Hertel, Thomas & Soderbery, Anson & van der Mensbrugghe, Dominique, 2020. "The role of trade elasticities in shaping uncertainty in CGE policy outcomes," Conference papers 333206, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
    2. Lionel Gérard Fontagné & Houssein Guimbard & Gianluca Orefice, 2020. "Product-Level Trade Elasticities: Worth Weighting For," CESifo Working Paper Series 8491, CESifo.
    3. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    4. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    5. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    6. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    7. repec:spo:wpmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    8. repec:spo:wpmain:info:hdl:2441/3lmdaefcr886ao8sahjmam30ke is not listed on IDEAS
    9. Fontagné, Lionel & Martin, Philippe & Orefice, Gianluca, 2018. "The international elasticity puzzle is worse than you think," Journal of International Economics, Elsevier, vol. 115(C), pages 115-129.
    10. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    11. repec:hal:spmain:info:hdl:2441/3lmdaefcr886ao8sahjmam30ke is not listed on IDEAS
    12. Bolatto, Stefano & Moramarco, Graziano, 2023. "Gains from trade and their quantification: Does sectoral disaggregation matter?," International Economics, Elsevier, vol. 174(C), pages 44-68.
    13. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    14. Hillberry, Russell & Hummels, David, 2013. "Trade Elasticity Parameters for a Computable General Equilibrium Model," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1213-1269, Elsevier.
    15. Maria Cipollina & David Laborde Debucquet & Luca Salvatici, 2017. "The tide that does not raise all boats: an assessment of EU preferential trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 199-231, February.
    16. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    17. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    18. repec:lmu:muenec:15421 is not listed on IDEAS
    19. Christian Hepenstrick & Alexander Tarasov, 2015. "Trade Openness and Cross-country Income Differences," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 271-302, May.
    20. Elisaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," Documents de Travail de l'OFCE 2012-17, Observatoire Francais des Conjonctures Economiques (OFCE).
    21. Christoph E. Boehm & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2023. "The Long and Short (Run) of Trade Elasticities," American Economic Review, American Economic Association, vol. 113(4), pages 861-905, April.
    22. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9ji21mi9p3 is not listed on IDEAS
    23. Xavier Jaravel & Erick Sager, 2018. "What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models," Economic Working Papers 506, Bureau of Labor Statistics.
    24. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9ji21mi9p3 is not listed on IDEAS
    25. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    26. Patrick Alexander, 2016. "Producer Heterogeneity, Value-Added, and International Trade," Staff Working Papers 16-54, Bank of Canada.
    27. Khan, Shafaat Yar & Khederlarian, Armen, 2021. "How does trade respond to anticipated tariff changes? Evidence from NAFTA," Journal of International Economics, Elsevier, vol. 133(C).
    28. Jaravel, Xavier & Sager, Erick, 2019. "What are the price effects of trade? Evidence from the US for quantitative trade models," LSE Research Online Documents on Economics 103402, London School of Economics and Political Science, LSE Library.
    29. Njike, Arnold, 2020. "Trade in value-added and the welfare gains of international fragmentation," MPRA Paper 100427, University Library of Munich, Germany.

    More about this item

    Keywords

    Trade Elasticity; International Trade; Tariffs; Welfare Gain;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cii:cepidt:2019-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cepiifr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.