Product-Level Trade Elasticities: Worth Weighting for

82 Pages Posted: 18 Aug 2020

See all articles by Lionel Fontagné

Lionel Fontagné

affiliation not provided to SSRN

Houssein Guimbard

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

Gianluca Orefice

World Trade Organization (WTO)

Date Written: 2020

Abstract

Trade elasticity is a crucial parameter in evaluating the welfare impacts of changes in trade frictions. The value of this parameter varies widely across product categories, however, which is especially important for developing countries' evaluation of the welfare gains from trade. We estimate, and make publicly-available, trade elasticities at the product level (the 6-digit level of the Harmonized System, comprising over 5,000 product categories) by exploiting the variation in bilateral applied tariffs for each product category for the universe of available country pairs over the 2001 to 2016 period. We address potential endogeneity issues, as well as heteroskedasticity and selection bias due to zero trade flows. Homogenous elasticities lead to the underestimation of the welfare impact of trade, in particular for developing economies, and all the more so for those with high import penetration in less-elastic sectors.

Keywords: trade elasticity, international trade, tariffs, welfare gains

JEL Classification: F140, F170

Suggested Citation

Fontagné, Lionel and Guimbard, Houssein and Orefice, Gianluca, Product-Level Trade Elasticities: Worth Weighting for (2020). CESifo Working Paper No. 8491, Available at SSRN: https://ssrn.com/abstract=3676097 or http://dx.doi.org/10.2139/ssrn.3676097

Lionel Fontagné (Contact Author)

affiliation not provided to SSRN

No Address Available

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
36
Abstract Views
169
PlumX Metrics