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GTAP Resource #4202

"Estimating Trade Elasticities and Asymmetric Trade Costs under Firm Heterogeneity"
by Bekkers, Eddy

Taking first order Taylor approximations an empirical strategy is proposed to estimate the trade elasticity using data on import shares, distance and gross output. The strategy is proposed for a Melitz economy. It consists of deriving two gravity type equations, a conventional gravity equation and a new gravity equation based upon the weighted sums of the import shares across trading partners. The new gravity equation follows from general equilibrium conditions on input cost adjustment. Using the estimates from the conventional gravity equation in the new gravity equation enables identification of the trade elasticity using only distance data. Employing the NBER-UN world trade data (Feenstra, 2005) for the largest 48 economies in the world at the aggregate level a trade elasticity of around two is found.

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Version: 1
Created: Bekkers, E. (4/15/2013)
Updated: Bekkers, E. (4/15/2013)
Visits: 1,523
- Calibration and parameter estimation
- Non-Tariff barriers

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