Trade Performances, Product Quality Perceptions, and the Estimation of Trade Price Elasticities

Traditional trade models ignoring the dimension of product quality generally lead to excessively low trade price elasticities. This paper estimates import market share equations including a quality image proxy derived from survey data. The estimation results, based on panel data for the four main EU member states, confirm the part played by product quality perceptions in the estimation of trade price elasticities, at least for highly differentiated products. Introducing the quality image proxy into the models leads to a significant increase in the price elasticities, which thus become superior to unity, in conformity with theoretical elasticities of substitution.     

Trade in Environmental Goods: Evidences from an Analysis Using Elasticities of Trade Costs

Negotiations on the liberalization of environmental goods (EGs) and services within the WTO Doha Round (mandated in November 2001) are facing specific challenges. Conflicting interests and differing perceptions of the benefits of increased trade in EGs were reflected in different approaches proposed for determining EGs. Using import data of 34 Organisation for Economic Co-operation and Development (OECD) member countries and from a sample of 167 countries, from 1995 to 2012, we discuss the trade effect of reducing barriers on EGs. We analyze the lists of EGs proposed by the Asia-Pacific Economic Cooperation and OECD using a Translog gravity model. We found that removing tariff barriers for EGs will have a modest impact because for the biggest importers and exporters, elasticities of trade costs are very low while for most trading relationships they are very high, making it difficult for exporters to maintain their markets. Overall, our results suggest that, because of their substantial effect on international trade, future negotiations on EGs should also address the issues of standards and nontariff barriers.     

The Effect of International Trade on Labor-Demand Elasticities: Intersectoral Matters

This paper studies the impact of trade on the price-elasticity of aggregate labor demand, based on the idea that a variation in the cost of (a given type of) labor has an effect on the sectoral trade specialization of an economy, at the expense of the domestic productions using this factor intensively, even when the trade balance is kept unchanged. As this effect is more important the more open the economy, trade openness induces an increase in the associated labor-demand elasticity, at least if the country has a comparative disadvantage in the industries using intensively the type of labor considered. This argument is illustrated by a simple model, based on an Armington hypothesis, with an empirical assessment for France.     

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.     

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.     

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.     

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.     

Productive Capacity, Product Varieties, and the Elasticities Approach to the Trade Balance

Most macroeconomic models imply that faster income growth tends either to lower a country’s trade balance by raising its imports with little change to its exports or to reduce its terms of trade in order to maintain balanced trade. Krugman (1989 ) proposed a model in which countries grow by producing new varieties of goods. In his model, faster‐growing countries are able to export these new goods and maintain balanced trade without suffering any deterioration in their terms of trade. This paper analyzes the growth of US imports from different source countries and finds strong support for Krugman’s model.     

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。     

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]     

Elasticities of rate schedule parameters

The rate schedules for services provided by regulated industries are often not defined in terms of simple per-unit charges but as multipart tariffs. For example, in the case of block price rates, the rate parameters are the definition of the block limits and the per-unit charges in each block. The analysis of these rates is complicated by the fact that most econometric models provide only per-unit or marginal-cost-based elasticities. This paper presents a technique for determining the rate schedule elasticities from elasticities for functions of the rate schedule parameters such as per-unit price elasticities. Also presented are methods for determining elasticities for combinations of service characteristics and the price schedule parameter elasticities for an entire service market. Examples are given for block water rates and Hopkinson and time-of-day electricity rates.     

Income Elasticities at different price vectors

Cross-country data are used to evaluate the income elasticities of the demand for ten broad groups of goods at two different price vectors: the observed prices of separate countries and the geometric means of these prices across all countries. The major effect is on the income elasticity of the demand for food; using observed rather than geometric mean prices results in lower elasticity values for the more affluent countries.     

Using Elasticities to Derive Optimal Income Tax Rates

This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution. In the general non-linear income tax problem, this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of Mirrlees. The optimal non-linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution. These formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters.     

Using Empirical Point Elasticities to Teach Tax Incidence

Using point elasticities rather than using either arc elasticities or slopes of demand and supply curves provides the best method for teaching students about the economic impacts of excise taxes. Not only does a point-elasticity approach simplify theoretical analysis of tax impacts, but it also allows instructors to take advantage of publicly available empirical estimates of demand and supply elasticities to show students how theoretical results can be applied to real-world tax policy issues. To illustrate these advantages, the authors use several available estimates of point elasticities of demand and supply of raw sugar to calculate the economic impacts of a recently proposed penny-per-pound tax on raw cane sugar grown in the Florida Everglades.     

Elasticities of substitution for a regulated cost function

This paper proposes a modification to the Uzawa (1962) characterization of the Allen partial elasticity of substitution under cost minimization to take account of the behavioral properties of the cost function for a firm subject to rate-of-return regulation.     

Estimation of Price Elasticities for International Telecommunications Demand

This paper examines the effect of price per call minute on international telecommunications demand for calls made from Greece to five destination countries: Australia, the USA, Canada, the UK, and Germany. For this purpose the authors consider two different models, one with constant price elasticity, the log-linear demand function, and another one with time varying price elasticity, log-linear demand where all variables except price are in logarithms. These models were estimated for calls made during peak and off-peak periods, using quarterly data from 1997:I to 2003:IV. The outgoing traffic includes volume of calls in minutes made by the incumbent only and by the incumbent and the mobile providers.     

Elasticities of import demand and economic development: The Irish Experience

In their paper on Venezuela, Melo and Vogt suggested two hypotheses concerning the relationship between the elasticities of import demand and economic development. In this paper these hypotheses are tested in relation to the experience of the Republic of Ireland, which it is argued closely approximated the conditions described by the Melo-Vogt hypotheses. Both hypotheses are rejected in the case of the Republic of Ireland, where it is argued special factors, such as the nature of the development strategy pursued and proximity to a large dominant trading partner, undetermined the conditions underlying the Melo-Vogt hypotheses.