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Product-Level Trade Elasticities: Worth Weighting For

Author

Listed:
  • Lionel Fontagné

    (Paris School of Economics, Université Paris I & CEPII)

  • Houssein Guimbard

    (CEPII)

  • Gianluca Orefice

    (University of Paris-Dauphine, CEPII and CESifo)

Abstract

Trade elasticity is a crucial parameter in evaluating the welfare impacts of changes in trade frictions. The value of this parameter varies widely across product categories, however, which is especially important for developing countries' evaluation of the welfare gains from trade. We estimate, and make publicly-available, trade elasticities at the product level (the 6-digit level of the Harmonized System, comprising over 5,000 product categories) by exploiting the variation in bilateral applied tari s for each product category for the universe of available country pairs over the 2001 to 2016 period. We address potential endogeneity issues, as well as heteroskedasticity and selection bias due to zero trade ows. Homogenous elasticities lead to the underestimation of the welfare impact of trade, in particular for developing economies, and all the more so for those with high import penetration in less-elastic sectors.

Suggested Citation

  • Lionel Fontagné & Houssein Guimbard & Gianluca Orefice, 2020. "Product-Level Trade Elasticities: Worth Weighting For," Working Papers DT/2020/08, DIAL (Développement, Institutions et Mondialisation).
    • Handle: RePEc:dia:wpaper:dt202008
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    2. Chica, Manuel & Hernández, Juan M. & Santos, Francisco C., 2022. "Cooperation dynamics under pandemic risks and heterogeneous economic interdependence," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    3. Wassie, Mengistu Alamneh & Kornher, Lukas & Zaki, Chahir, 2024. "Revisiting the Impact of Trade Facilitation Measures in Africa: Structural Gravity Estimation and Ad Valorem Tariff Equivalents," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344296, International Association of Agricultural Economists (IAAE).
    4. Gervais, Antoine, 2023. "Controlling for exporter-level factors when estimating import demand elasticities," Economics Letters, Elsevier, vol. 231(C).
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    More about this item

    Keywords

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

    JEL classification:

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

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