Estimation of Regional Trade Substitution Elasticities for Brazil

This study estimates elasticities of regional trade in Brazil considering 110 products and 558 regions. For this, a large database was generated, becoming one of the most important stages in the trajectory of the study given the highly intensive procedures performed to obtain the final interregional trade flows. The elasticities were estimated using the Armington (1969) model, adapted from Bilgic’s (2002) suggestion regarding the definition of variables. Few studies were identified in the literature that aimed at estimating elasticities of substitution in regional trade, adding relative importance to this study. This fact may be related to the generation of the database because of the non-triviality in the numerous requirements and specific information of the economy. The estimation results presented, in general, coefficients with expected signs and the elasticities changed according to the types of products. Products related to agricultural and mining activities had less elastic coefficients than the coefficients of the service activities. The products related to industrial activities presented jointly an average coefficient equal to -1.775