The Elasticity of Trade: Estimates and Evidence

Ina Simonovska and Michael Waugh

No 16796, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Quantitative results from a large class of structural gravity models of international trade depend critically on the elasticity of trade with respect to trade frictions. We develop a new simulated method of moments estimator to estimate this elasticity from disaggregate price and trade-flow data and we use it within Eaton and Kortum's (2002) Ricardian model. We apply our estimator to disaggregate price and trade-flow data for 123 countries in the year 2004. Our method 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.

JEL-codes: F10 F11 F14 F17 (search for similar items in EconPapers)
Date: 2011-02
Note: ITI
References: View complete reference list from CitEc
Citations: View citations in EconPapers (108)

Published as Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.

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Related works:
Journal Article: The elasticity of trade: Estimates and evidence (2014)
Working Paper: The Elasticity of Trade: Estimates and Evidence (2011)
Working Paper: The Elasticity of Trade: Estimates and Evidence (2011)
Working Paper: The Elasticity of Trade: Estimates and Evidence (2010)
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