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Import Price-Elasticities: Reconsidering the Evidence

Hélène Erkel-Rousse and Daniel Mirza ()

Papiers d'Economie Mathématique et Applications from Université Panthéon-Sorbonne (Paris 1)

Abstract: Recent geography and trade empirical studies based on monopolistic competition [Hanson, 1998 ; Head and Ries, 1999 ; Hummels, 1999], suggest high levels of trade price elasticities (between 3 and11). However, direct estimations of price-elasticities in trade equations, using price indexes at aggregate or industry levels, lead to much lower values than those predicted by theory (usually around unity). In this paper, we show that these inconclusive results may be due to an econometric misspecification of these equations, measurement errors in import price indexes as well as endogeneity between prices and trade quantities.

Keywords: COMPETITION; PRICES; TRADE; ELASTICITY (search for similar items in EconPapers)
JEL-codes: C2 C3 F1 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000
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Journal Article: Import price elasticities: reconsidering the evidence (2002) Downloads
Working Paper: Import Price-Elastcities: Reconsidering the Evidence (2000) Downloads
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Handle: RePEc:fth:pariem:2000.52