The elasticity of trade
Subtitle: estimates and evidence
By: Ina Simonovska, Michael E. Waugh
Contributors: Waugh, Michael E.; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16796; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16796.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Quantitative results from a large class of international trade models depend critically on the elasticity of trade with respect to trade frictions.  We develop a simulated method of moments estimator to estimate this elasticity from disaggregate price and trade-flow data using the Ricardian model.  We motivate our estimator by proving that the estimator developed in Eaton and Kortum (2002) is biased in any finite sample.  We quantitatively show that the bias is severe and that the data requirements necessary to eliminate it in practice are extreme.  Applying our estimator to new disaggregate price and trade-flow data for 123 countries in the year 2004 yields a trade elasticity of roughly four, nearly fifty percent lower than Eaton and Kortum's (2002) approach.  This difference doubles the welfare gains from international trade"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/17/2011.

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