Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES‐based Gravity Approach? |
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| Authors: | Alexandre Gohin Fabienne Féménia |
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| Institution: | Alex Gohin is with INRA and Agrocampus Rennes, UMR1302, F‐35000, Rennes, France, and also with CEPII, Paris. E‐mail: for correspondence. Fabienne Féménia is also with INRA and Agrocampus Rennes. The authors acknowledge financial support by the Agricultural Trade Agreements (TRADEAG) project, funded by the European Commission, DG Research (Specific Targeted Research Project Contract no. 513666). The authors thank A. Carpentier and C. Gaigné for their comments on earlier versions, as well as the two anonymous referees and the editor for their very thorough review and their constructive comments. Otherwise, the authors are solely responsible for the contents of this paper. |
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| Abstract: | The main objective of this article is to examine econometric estimates of price elasticities of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, Constant Elasticity of Substitution (CES) preferences. We test all these assumptions using intra‐European trade in cheese. In general, the assumptions made on preferences by the gravity approach are not supported by our dataset. The bias induced in the estimated price elasticities is ambiguous. |
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| Keywords: | Censored demand system elasticities generalised maximum entropy trade D12 Q17 |
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