Gains from trade and their quantification: Does sectoral disaggregation matter?

Stefano Bolatto and Graziano Moramarco

International Economics, 2023, vol. 174, issue C, 44-68

Abstract: Multi-sector variants of gravity models typically predict much larger gains from trade (losses from protectionism) than their one-sector counterparts. This result –corroborated by several model-based quantification studies and commonly ascribed to Jensen’s inequality– has been recently questioned by studies that use micro price data to obtain sector-level estimates of the trade elasticity, a key parameter for the quantification of the gains. We reassess this issue by using a novel set of estimates of the trade elasticity at various levels of sectoral disaggregation, exploiting a recently proposed identification strategy based on tariffs. In our baseline 24-sector model specification, we find that the cross-country average size of the gains amounts to 12% and that this number is 21% larger than the one delivered by the one-sector specification. Overall, our results suggest that the effects of magnification of the gains associated with greater sectoral disaggregation (which we confirm to be mainly driven by cross-sector variation in trade elasticity) are significant, not negligible, but considerably smaller than generally quantified in the previous literature.

Keywords: Gains from trade; Gravity models; Trade elasticity; Sectoral disaggregation (search for similar items in EconPapers)
JEL-codes: F10 F11 F60 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2110701723000203
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:174:y:2023:i:c:p:44-68

DOI: 10.1016/j.inteco.2023.03.001

Access Statistics for this article

International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga

More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).