Supply Capacity, Vertical Specialisation andTrade Costs: The Implications for Aggreagate US Trade Flow Equations

Menzie D. Chinn
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Menzie D. Chinn: University of Wisconsin, Madison and NBER

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: This paper re-examines aggregate and disaggregate import and export demand functions for the United States over the 1975-2010 period. This re-examination is warranted because (1) income elasticities are too high to be warranted by standard theories, and (2) remain high even when it is assumed that supply factors are important. These findings suggest that the standard models omit important factors. An empirical nvestigation ndicates that the rising importance of vertical specialization combined with changing tariff rates and transportation costs explains some of results. Accounting for these factors ields more plausible estimates of income elasticities.

Keywords: imports; exports; elasticities; vertical specialization; production fragmentation; trade costs. (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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