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Import Price-Elasticities : Reconsidering the Evidence

Author

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  • Erkel-Rousse, H.
  • Mirza, D.

Abstract

Recent geography and trade empirical studies based on monopolistic competition [Hanson, 1998 ; Head and Ries, 1999 ; Hummels, 1999], suggest high levels of trade price elasticities (between 3 and11). However, direct estimations of price-elasticities in trade equations, using price indexes at aggregate or industry levels, lead to much lower values than those predicted by theory (usually around unity). In this paper, we show that these inconclusive results may be due to an econometric misspecification of these equations, measurement errors in import price indexes as well as endogeneity between prices and trade quantities.

Suggested Citation

  • Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie Mathématique et Applications 2000.52, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:fth:pariem:2000.52
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    1. Matthieu Crozet & Helene Erkel-Rousse, 2000. "Trade performances and the estimation of price-elasticities: Quality matters," Cahiers de la Maison des Sciences Economiques bla00061, Université Panthéon-Sorbonne (Paris 1).
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    More about this item

    Keywords

    COMPETITION ; PRICES ; TRADE ; ELASTICITY;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F1 - International Economics - - Trade

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