Research article - Peer-reviewed, 2022
Import demand elasticities based on quantity data: Theory and evidence
Ferguson, Shon M.; Smith, AaronAbstract
Correct estimates of import demand elasticities are essential for measuring the gains from trade and predicting the impact of trade policies. We show that estimates of import demand elasticities hinge critically on whether they are derived using trade quantities or trade values, and this difference is due to properties of the estimators. Using partial identification methods, we show theoretically that the upper bound on the set of plausible estimates is lower when using traded quantities, compared to the standard approach using trade values. Our theoretical predictions are confirmed using detailed product-level data on US imports for the years 1993 to 2006. Our proposed method using traded quantities leads to smaller point estimates of the import demand elasticities for many goods and imply larger gains from trade compared to estimates based on trade values.Published in
Canadian Journal Of Economics/Revue canadienne d'économique2022, volume: 55, number: 2, pages: 1027-1056
Publisher: WILEY
Authors' information
Swedish University of Agricultural Sciences, Department of Economics
Smith, Aaron
University of California Davis (UC Davis)
UKÄ Subject classification
Economics
Publication Identifiers
DOI: https://doi.org/10.1111/caje.12596
URI (permanent link to this page)
https://res.slu.se/id/publ/117329