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Methodological shortcomings in estimating Armington elasticities


  • Cassoni, Adriana
  • Flores, Manuel


CGEMs are one of the most potentially powerful tools for simulating policies. However, a major restriction they face is them needing a huge number of parameters that are not always available, and even at times impossible to obtain. When CGEMs are applied to trade, Armington elasticities of substitution are one of those key sets. The common practice among CGEMs builders has been to impose these values, either at will or by using those stemming from other existing research. There is general consensus, however, that econometrically estimated parameters for each case study would substantially improve the robustness of results. Unfortunately, most of the so obtained elasticities are considered underestimates of both the real and theoretically expected parameters. This gave rise to a growing concern on the eventual role played by methodological and empirical issues in this matter. There are some findings that have generated a quite general consensus among researchers, related to the type of datasets used; the disaggregation levels at which goods are defined and the origins of imported varieties are considered; the frequency of data; among others.

Suggested Citation

  • Cassoni, Adriana & Flores, Manuel, 2008. "Methodological shortcomings in estimating Armington elasticities," MPRA Paper 34544, University Library of Munich, Germany, revised 2009.
  • Handle: RePEc:pra:mprapa:34544

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    References listed on IDEAS

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    Cited by:

    1. Baas, Timo & Melzer, Silvia, 2016. "The Macroeconomic Impact of Remittances: A Sending Country Perspective," Annual Conference 2016 (Augsburg): Demographic Change 145631, Verein für Socialpolitik / German Economic Association.

    More about this item


    Armington elasticity; CGEM; methodology;

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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