Product-Level Trade Elasticities

CEPII Working Paper No 2019-17

65 Pages Posted: 24 Feb 2020

See all articles by Lionel Fontagne

Lionel Fontagne

Banque de France; CEPII; University of Paris 1 Panthéon Sorbonne; Paris School of Economics

Houssein Guimbard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Gianluca Orefice

World Trade Organization (WTO)

Date Written: December 16, 2019

Abstract

Trade elasticity is a crucial parameter in evaluating the welfare impacts of trade liberalization. We estimate trade elasticities at the product level (6-digit of the Harmonized System comprising more than 5,000 product categories) by exploiting the variation in bilateral applied tariffs for each product category for the universe of available country pairs. This is done by constructing a panel of bilateral applied tariffs and bilateral trade covering the period 2001 to 2016. We address potential endogeneity issues as well as heteroskedasticity and selection bias due to zero flows. The obtained trade elasticities are centered around -5. We finally highlight the differences in the gains from trade arising from considering heterogeneous rather than average trade elasticities. All product level elasticities are made publicly available for sake of scrutiny and use by other researchers.

Keywords: Trade Elasticity, International Trade, Tariffs, Welfare Gain

JEL Classification: F14, F17

Suggested Citation

Fontagne, Lionel and Guimbard, Houssein and Orefice, Gianluca, Product-Level Trade Elasticities (December 16, 2019). CEPII Working Paper No 2019-17, Available at SSRN: https://ssrn.com/abstract=3526933 or http://dx.doi.org/10.2139/ssrn.3526933

Lionel Fontagne (Contact Author)

Banque de France ( email )

Paris
France

HOME PAGE: http://www.lionel-fontagne.eu/

CEPII ( email )

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HOME PAGE: http://lionelfontagne.weebly.com/

Paris School of Economics ( email )

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University of Paris 1 Panthéon Sorbonne ( email )

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Houssein Guimbard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

113 rue de Grenelle
Paris, F-75007
France

Gianluca Orefice

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

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