Price, unit value, and quality demanded

Given the paucity of quality price data, it is common to rely on “unit value” (average expenditure per unit) as a proxy for price, but this is an imperfect proxy if households respond to price increases by substituting to lower quality goods. This paper draws on survey data that contain both unit value and price to estimate the severity of quality substitution in Indonesia, finding that it is prevalent. The paper next calculates price elasticities that correct for quality substitution, evaluating and ultimately rejecting a commonly used method for calculating price elasticities using only unit value data. Finally, it demonstrates that quality substitution can result in biased price elasticities even when price is perfectly observed.     

Has the Euro increased international price elasticities?

The introduction of the Euro has been accompanied by the hope that international competition between EMU member states would increase due to higher price transparency. This paper contributes to the literature by analyzing price elasticities in international trade flows between Germany and France and between Germany and the United Kingdom before and after the introduction of the Euro. Using disaggregated Eurostat trade statistics, we adopt a heterogeneous dynamic panel framework for the estimation of price elasticities. We suggest a Kalman-filter approach to control for unobservable quality changes which otherwise would bias estimates of price elasticities. We divide the complete sample, which ranges from 1995 to 2008, into two sub-samples and show that price elasticities in trade between EMU members did not change substantially after the introduction of the Euro. Hence, we do not find evidence for an increase in international price competition resulting from EMU.     

The competitive nature of the nursing home industry: price mark ups and demand elasticities

Nursing home markets are likely to deviate from a competitive structure because of limitations on entry imposed by Certificate of Need (CON) regulations and the potential for product differentiation along such attributes as location, religious affiliation and quality. This paper investigates the structure of nursing home markets in New York State by calculating price mark ups and residual private pay demand elasticities. It shows that the residual demand elasticity is bound by estimates based on price mark ups above marginal costs and above Medicaid rates. This approach allows estimation of demand elasticities in all markets, whether or not CON regulations constrain bed supply. Mean price elasticities (in absolute value) calculated for nursing homes in New York State in 1991 ranged from 3.46 to 3.85.     

Growth, Expansion of Markets, and Income Elasticities in World Trade

The Houthakker–Magee effect implies that a country facing unfavorable income elasticities in trade must either grow at a slower rate than its trading partners or experience a trend worsening of the current account and/or depreciation of the real exchange rate. Krugman (1989 ) first documented the existence of a "45-degree rule" under which income elasticities are systematically related to growth rates. I develop a model which is a generalization of Krugman (1989 ) in several dimensions (including intertemporal). The intertemporal assumption of equal consumption growth for individuals across countries and the assumption of no intertemporal trade can be viewed as two extreme benchmarks. Empirical tests of the various 45-degree rules suggest that it is misleading to treat income elasticities as structural, as is commonly done in forecasts of current account movements. The data also seem to be more consistent with the benchmark of no intertemporal trade than that of complete intertemporal trade.     

Trade,Wages, and Specific Factors*

In this paper, we use a multisector specific‐factors model with sector‐specific capital and two mobile factors, skilled and unskilled labor, to examine the effects of trade, technology, and factor endowments on the skill premium in US manufacturing industries. Based on this model and data for the US manufacturing sector from 1958–96, we calculate changes in the skill premium and then carry out a decomposition to identify the changes caused by product price changes (trade), technological progress, labor, and capital endowment changes. The decomposition reveals that trade effects, working through product price changes, caused the skill premium to increase moderately. Changes in capital endowments (new investments) had a positive effect on the skill premium, with the strongest impact during the 1980s, while the effect of technological change on the skill premium varied over time. Finally, changes in relative labor endowments had a negative effect on the skill premium.     

Estimating Income and Price Elasticities of Trade in a Cointegration Framework

This paper presents further evidence on the empirical regularity known as the "45-degree rule." Income and price elasticities of trade are estimated for 21 countries in a cointegration framework. More specifically, the autoregressive distributed lag (ARDL) modeling approach and the DOLS procedure are adopted to estimate the long-run structure. The empirical results confirm the existence of a systematic relationship between growth rates and income elasticity estimates: faster growing economies have high income elasticities of demand for their exports but lower import elasticities, which implies that faster growth can be observed without any marked secular trend in real exchange rates.     

Export demand elasticities and productivity as determinants of growth: estimates for Mauritius

In this article, we combine the export led and import led growth hypotheses in a growth model in which the importation of foreign capital goods and the demand elasticities of own export products explain the growth opportunities and the technical progress of developing countries. This model, based on imported capital goods, uses Mauritius’ data on capital investment, employment, export partners’ growth and terms of trade to estimate price and income elasticities of export demand, total factor productivity growth and economies of scale. These elasticities are then used to assess how the growth in export partners’ income is converted into domestic growth. The implications of the presence of low or high export demand elasticities are discussed by relating them to various strands of trade and growth literature. Based on the results of this estimation, we also calculate steady state growth rates, engine and handmaiden effects of growth as well as the dynamic steady state gains from trade for this latecomer export economy. The implications of steady state results are also discussed in the light of the Mauritian employment and growth perspectives.     

Trade Agreements and Trade Opportunities: A Flexible Approach for Modeling Australian Export and Import Elasticities

Patterns of trade have changed enormously over the last 30 years, particularly due to the economic emergence of several Asian countries. With the increasing international tendency for bilateral preferential trade agreements, it is important for countries to be aware of trade substitution possibilities. This paper estimates import and export price elasticities for Australia and its major trading partners in Europe and Asia, 1958 to 2002, using a fully flexible version of the Symmetric Normalized Quadratic aggregator function. Imports and exports are disaggregated into six regions, covering 17 countries. Our results illuminate the (changing) substitution and complementarity patterns for Australian foreign trade, highlighting trading opportunities in the face of a changing international environment.     

人民币升值能解决美国对华贸易赤字吗?——基于1994～2005年间月度数据的贸易弹性分析

文章以1994年1月到2005年3月的月度数据为样本,用ARDL框架下的协整方法,对中美贸易的收入弹性和实际汇率弹性进行了经验分析。分析后发现:第一,我国对美进出口的收入弹性都是显著的,并且我国对美国出口的收入弹性约为我国从美进口的收入弹性的6倍,但是我国对美进口和出口的实际汇率弹性都是不显著的。因此,文章认为人民币汇率对中美贸易没有显著影响,人民币汇率升值将无法改善美国的对华贸易收支。     

Trade policy and quality leadership in transition economies

Trade policy and quality leadership in transition economies are analyzed in a duopoly model of trade and vertical product differentiation. We first show that the incidence of trade liberalization is sensitive to whether firms in transition economies are producers of low or high quality. Second, we find that neither free trade nor the absence of a domestic subsidy are optimal: Both a tariff and a subsidy increase price competition and while the former extracts foreign rents the latter results in quality upgrading. Third, there exists a rationale for a government to commit to a socially optimal policy to induce quality leadership by the domestic firm when cost asymmetries are low. Finally, we establish an equivalence result between the effects of long-run exchange rate changes and those of trade policy on price competition (but not on social welfare).     

Cointegration Approach to Estimating Bilateral Trade Elasticities Between U.S. and Her Trading Partners

Almost all previous authors who estimated the trade elasticities relied upon aggregate trade data. To avoid the aggregation bias, this paper provides estimates of trade elasticities using bilateral data between the United States and her six largest trading partners. Application of cointegration analysis reveals that in many cases, bilateral trade elasticities are large enough to justify real depreciation of the dollar as a mean of improving U.S. trade balance.[F14]     

Distorted Trade Barriers: A Dissection of Trade Costs in a “Distorted Gravity” Model

It is common in the trade literature to use iceberg transport costs to represent both tariffs and shipping costs alike. However, in models with monopolistic competition these are not identical trade restrictions. This difference is driven by how the two costs affect the extensive margin. We illustrate these differences in a gravity model. We show theoretically that trade flows are more elastic with respect to tariffs than transport costs and find a linear relationship between the elasticities with respect to tariffs, iceberg transport costs, and fixed market costs. We empirically validate these results using data on US product‐level imports.     

Neoclassical Growth, Manufacturing Agglomeration, and Terms of Trade

This study reverses the prediction of geography and growth models that trade integration may cause income divergence. Moreover, a new dynamic welfare gain of trade openness is identified. These results are obtained from embedding a new economic geography model into a neoclassical growth model. Starting from symmetric countries, a country that accumulates more capital than the other increases its home market size, improves its terms of trade, and lowers its relative consumption price index, because trade costs drive a wedge in between relative producer and consumption price indices. Both effects in turn tend to increase its marginal revenue product of capital relative to the other country (divergence forces), while factor substitution diminishes its marginal revenue product of capital (convergence force). Reducing trade costs decreases the wedge and weakens the divergence forces, while the convergence force is unaffected. Hence, divergence is more likely with higher rather than lower trade costs.     

City size and household food consumption: demand elasticities in Spain

Are food price elasticities different across city sizes? The aim of this article is to estimate expenditure and own-price elasticities for 10 aggregated food product groups using the Spanish Household Budget Survey for the year 2010. These products are the ones for which the survey provides information regarding prices and quantities, thus allowing the application of an Almost Ideal Demand System (AIDS) model with censored data. The estimation procedure allows not only comparisons to be made among households with different levels of income, but also the contribution of residence characteristics to variations in demand. The results confirm that the size of the city in which the household resides has a similar significant and relevant effect on consumption patterns as family income level. This is especially clear with own-price elasticities. In Spain, large central cities show a greater response to price changes than smaller cities or rural peripheral areas.     

Trade in technology : Management decisions and pricing

In this article, a model of technology price estimation is developed. The process of trade in technology is seen as resulting in a partial transfer of the market in which the seller of the technology had previously sold his product to the buyer of the technology. Profit decrease of the seller because of market cuts is taken as the basis for the pricing of technology. The random nature of the useful lifetime of the technology is taken into account, and the influence of seller-firm characteristics on the technology price is analyzed.     

基于面板数据的中国贸易弹性估计

利用1990-2005年中国与其20个主要贸易国家和地区的面板数据,基于不完全替代理论构建实证模型,运用面板数据单位根和协整技术对中国对外贸易的价格和收入弹性进行估计。结果表明：进出口贸易关于价格都是缺乏弹性的,从收入弹性来看,进口需求的收入弹性小于2,出口的收入弹性接近于5,出口相对于进口有着更大的收入弹性,这是造成在世界金融危机背景下中国贸易形势发生逆转的主要原因。     

Long-Period Trade Elasticities for Canada, Japan, and the United States

Most analyses of imports use brief, postwar samples and offer a large range of elasticity estimates suggesting that the role of income and prices in determining imports is not known with any precision. This paper offers an analysis of that role using data since 1890 for Canada, Japan, and the United States. The elasticities of the log–linear model are estimated and found to be inconsistent with the view that income and prices affect imports. Optimization models are considered and found to predict secular changes in income and price elasticities and explain the dispersion of estimates of the literature.     

Trade, democracy, and the gravity equation

Does democracy affect trade? There are several channels by which democracy may affect trade, with differing implications. First, democratization in the exporting country can improve product quality and reduce trade costs, increasing bilateral trade. Second, democratization in the importing country may increase trade barriers and thus reduce imports. In this paper, I analyze the effect of democracy on trade by augmenting the gravity equation with democracy. Using a rich panel data set and controlling for the endogeneity of democracy, I find empirical evidence consistent with the hypothesis that democracy fosters trade. This finding is robust to various econometric methods and to the use of disaggregated specifications.     

U.S. import and export elasticities: a panel data approach

This article describes the creation of a new dataset on sectoral-level import and export elasticities in the U.S. between the years 1978 and 2001. It proposes the use of panel data techniques as a means of generating import price indexes, and then using them to measure trade elasticities while instrumenting for the endogeneous variables. In particular, it provides a dataset listing trade elasticities for a broad range of sectors at the North American Industry Classification System 4-digit, and 6-digit and the Harmonized Tariff System 6-digit, and 10-digit levels of industry aggregation. These results are compared to previous estimates in the literature. The resulting estimates can be used in a wide-range of applications in empirical studies of international trade policy, particularly in analyzing the welfare effects of international trade.     

Taste Parameters as Model Residuals: Assessing the "Fit" of an Armington Trade Model

We note that calibration parameters in a multi‐country Armington trade model play a role similar to that of econometric residuals: they allow the model to fit the data exactly. We use this premise to evaluate the “fit” of a standard multi‐country computable general‐equilibrium model. We find that the model relies heavily on these parameters to explain the pattern of trade. In 33 of the 46 commodity groups we assess, modeled economic behavior explains less than 20% of the variation in bilateral trade. In a calibration‐ as‐estimation experiment, we estimate the commodity‐specific elasticities of substitution consistent with a well‐fitting model and find that they are substantially higher than widely accepted estimates.