Data and Code For: The Long and Short (Run) of Trade Elasticities
Principal Investigator(s): View help for Principal Investigator(s) Christoph Boehm, University of Texas at Austin; Andrei Levchenko, University of Michigan; Nitya Pandalai-Nayar, University of Texas at Austin
Version: View help for Version V1
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Project Description
Summary:
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This is replication code and data for the paper "The Long and Short (Run) Of Trade Elasticities."
Abstract: We propose a novel approach to estimate the trade elasticity at various horizons. When countries change Most Favored Nation (MFN) tariffs, partners that trade on MFN terms experience plausibly exogenous tariff changes. The differential effects on imports from these countries relative to a control group – countries not subject to the MFN tariff scheme – can be used to identify the trade elasticity. We build a panel dataset combining information on product-level tariffs and trade flows covering 1995-2018, and estimate the trade elasticity at short and long horizons using
Abstract: We propose a novel approach to estimate the trade elasticity at various horizons. When countries change Most Favored Nation (MFN) tariffs, partners that trade on MFN terms experience plausibly exogenous tariff changes. The differential effects on imports from these countries relative to a control group – countries not subject to the MFN tariff scheme – can be used to identify the trade elasticity. We build a panel dataset combining information on product-level tariffs and trade flows covering 1995-2018, and estimate the trade elasticity at short and long horizons using
local projections (Jordà, 2005). Our main findings are that the elasticity of tariff-exclusive trade flows in the year following the exogenous tariff change is about −0.76, and the long-run elasticity ranges from −1.75 to −2.25. Our long-run estimates are smaller than typical in the literature, and it takes 7-10 years to converge to the long run, implying that (i) the welfare gains from trade are high and (ii) there are substantial convexities in the costs of adjusting export participation.
Scope of Project
Subject Terms:
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Trade Elasticity
JEL Classification:
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F14 Empirical Studies of Trade
F40 Macroeconomic Aspects of International Trade and Finance: General
F14 Empirical Studies of Trade
F40 Macroeconomic Aspects of International Trade and Finance: General
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