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GTAP Resource #5861

"Structural Estimates of Trade Elasticities"
by Bekkers, Eddy, Peter Egger, Octavio Fernandez-Amador, Joseph Francois and Hugo Rojas-Romagosa

Trade elasticities are a key element in computational analysis of trade policy. Strategies for identification have ranged from price-based (unit value) estimates to estimates that rely on tariff data. Both approaches are problematic in the case of services, where we generally have lacked data suitable for either approach. In this paper, we estimate trade elastici- ties“structurally,” meaning using a set of estimating gravity equations derived from the un- derlying theory that underpins the trade flow equations in a standard range of computation models. The elasticities are suitable for Armington, Eaton-Kortum, and Ethier-Krugman models, as well as some forms of the Melitz model. The interpretation of the estimated coefficients varies by model, as discussed in the paper. We also introduce a method for estimation of services trade elasticities. The econometrics are based on (and so internally consistent with) the GTAP database, wherein we utilize data on own country trade (do- mestic absorption) in addition to external trade. We also control for both the depth and potential endogeneity of PTAs in the regressions. The importance of distinguishing between PTAs, where rules of origin and compliance costs are relevant when trading across borders, and customs union and MFN-based trade, where they are not, is also examined.

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Not published
By/In: Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Version: 1
Created: Francois, J. (4/15/2019)
Updated: Francois, J. (6/17/2019)
Visits: 1,341
- Calibration and parameter estimation
- Preferential trading arrangements

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