Product-Level Trade Elasticities

Abstract

Trade elasticity is a crucial parameter in evaluating the welfare impacts of trade liberalization. We estimate trade elasticities at the product level (6-digit of the Harmonized System) by exploiting the variation in bilateral applied tariffs for each product category. The obtained trade elasticities are centered around-5. We show that using homogeneous-instead of product-specific-trade elasticity implies a downward bias in welfare gains from trade in particular for developing countries.

The costs of regulatory barriers to trade in services

“…12 Existing studies aimed at quantifying the costs of cross-border trade in services can be grouped into two broad categories corresponding to different applications of the gravity model: indirect and direct approaches. 13 In the first group, several contributions have estimated services trade costs without using information on policies affecting services trade. Such indirect strategies generally rely on comparisons of observed trade flows with a benchmark and identify bilateral trade costs relative to that benchmark.…”

“…Such indirect strategies generally rely on comparisons of observed trade flows with a benchmark and identify bilateral trade costs relative to that benchmark. Studies in this group estimate cross-border services trade costs relative to the country with highest services trade considering its observable characteristics (Fontagne, Guillin and Mitaritonna, 2011 [12]; Fontagné, Mitaritonna and Signoret, 2016 [13]) or relative to the cost of domestic sales using information on the extent to which a country consumes domestically produced services (Miroudot, Sauvage and Sheperd, 2013 [14]). 14 These indirect approaches highlight differences across sectors and countries.…”

“…Existing studies on Mode 3 services trade usually focus on a single country (Christen and Francois, 2015 [56]) or a limited number of countries (Rouzet, Benz and Spinelli, 2017[43]). 13 Note that the concise literature review provided in this section is not exhaustive. A limited number of studies cannot be clearly attributed to either of those two categories.…”

Services trade costs in the United States: A simulation based on the OECD Services Trade Restrictiveness Index

“…In the fourth column, the elasticity for financial services is the simple average of financial services (1.51) and auxiliary financial (2.59). The estimates rely on firm-level data on profit margins from the United Kingdom and Finland (Rouzet, Benz and Spinelli, 2017), sector-level data on trade and unit labour costs from a set of 41 countries covered in the WIOD database (Egger et al, 2020), firm-level data on profit-margins from Austria (Christen, Pfaffermayr and Wolfmayr, 2019), firm-level data on profit-margins from Germany (Blank et al, 2018) and sector-level data on unit labour costs from a set of 59 economies covered in the OECD TiVA database (Fontagné, Orefice and Santoni, 2019).…”

The Impact of COVID-19 international travel restrictions on services-trade costs

“…Insurance would also be hit, but to a lesser extent. In these sectors, estimates suggest a strong impact of small regulatory changes on trade costs (Benz and Jaax, 2020a;Nordas and Rouzet, 2017;Benz, 2017;Fontagné et al, 2019). A tentative interpretation of this large effect could be that restrictions on travels have contributed to a rise in uncertainty which has added to trade costs.…”