Unlocking New Methods to Estimate Country-specific Trade Costs and Trade Elasticitie

Rebecca Freeman, Mario Larch, Angelos Theodorakopoulos and Yoto Yotov

No 2021-17, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: We propose new methods to identify the full impact of country-specific characteristics on bilateral trade flows within the framework of “the new quantitative trade model.” We complement theory with a simple two-stage estimating procedure, and offer a proof of concept by quantifying the impact of country-specific R&D expenditure on trade. Results suggest a positive relationship overall, but a larger impact on international (versus domestic) trade. Further, our methodology allows us to recover trade elasticity estimates without the need for price/tariff data. Bringing this to the sectoral level, we obtain estimates of the trade elasticity for manufacturing, services, and tradable versus non-tradable sectors

Keywords: Structural gravity; Country-specific trade costs; Trade elasticity; Elasticity of substitution; R&D and trade (search for similar items in EconPapers)
JEL-codes: F10 F14 F16 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2021-11-21
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Unlocking new methods to estimate country-specific trade costs and trade elasticities (2021)
Working Paper: Unlocking New Methods to Estimate Country-Specific Trade Costs and Trade Elasticities (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2021_017

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