Arbeitspapier

Estimating the elasticity of trade: The trade share approach

Recent theoretical work on international trade emphasizes the importance of trade elasticity as the fundamental statistic needed to conduct welfare analysis. Eaton and Kortum (2002) proposed a two-step method to estimate this parameter, where exporter fixed effects are regressed on proxies for technology and wages. Within the same Ricardian model of trade, the trade share provides an alternative source of identication for the elasticity of trade. Following Santos Silva and Tenreyro (2006) both trade share and EK models are estimated using OLS and Poisson PML to test for the presence of heteroskedasticity-type-of-bias. The evidence from both specifications suggests that the bias in the OLS estimates significantly impacts the magnitude of trade cost elasticity. The welfare analysis reveals that the resulting extreme variability of the trade cost elasticity and the imposition of a common manufacturing share parameter for all countries generate substantial distortions in the calculation of benefits from trade.

Sprache
Englisch

Erschienen in
Series: LEM Working Paper Series ; No. 2013/10

Klassifikation
Wirtschaft
Trade: General
Neoclassical Models of Trade
Empirical Studies of Trade
Thema
trade cost elasticity
gravity model
competitiveness equation
trade share
gains from international trade

Ereignis
Geistige Schöpfung
(wer)
Lanati, Mauro
Ereignis
Veröffentlichung
(wer)
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)
(wo)
Pisa
(wann)
2013

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
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Objekttyp

  • Arbeitspapier

Beteiligte

  • Lanati, Mauro
  • Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM)

Entstanden

  • 2013

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