Production and Demand Models with Direct or Indirect Implicit Additivity

Using supplier-level trade data, we estimate the effect on consumer welfare from changes in U.S. imports both in the aggregate and for different household income groups from 1998 to 2014. To do this, we use consumer preferences which feature non-homotheticity both within sectors and across sectors. After structurally estimating the parameters of the model, using the universe of U.S. goods imports, we construct import price indexes in which a variety is defined as a foreign establishment producing an HS10 product that is exported to the United States. We find that lower income households experienced the most import price inflation, while higher income households experienced the least import price inflation during our time period. Thus, we do not find evidence that the consumption channel has mitigated the distributional effects of trade that have occurred through the nominal income channel in the United States over the past two decades.

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“…15 In contrast, only exact nonlinear aggregation is retained in the implicitly additive non-homothetic CES demand system of Hanoch (1975).…”

mentioning

confidence: 99%

Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data

Hottman

Monarch

2018

Int. finance discuss. pap.

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“…This set of preferences (known as "normalized Constant Elasticity of Substitution") were first studied by Gorman (1965) and Hanoch (1975), and were found to be especially apt for studying long-run structural change by Comin et al (2015). Comin et al (2015) show that this specification of nonhomothetic preferences has two attractive properties.…”

Section: Endowments and Preferencesmentioning

confidence: 99%

Structural Change and Global Trade

Lewis¹,

Monarch²,

Sposi³

et al. 2018

gwp

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Since 1970, services has risen from 50 percent of the world's final consumption expenditures to nearly 80 percent. Services are also far less traded between countries than goods. Thus, as consumers become more service-oriented, the world will become "less open", affecting international trade volumes. Using a general equilibrium trade model with non-homothetic preferences and endogenous shifts in consumption behavior, we quantify the impact of such structural change on global trade across 27 countries. We find that world trade as a fraction of GDP would have been about 23 percentage points or 70 percent higher by 2015 if countrylevel expenditure patterns were unchanged from 1970 onwards. Income effects explain about one-quarter of this counterfactual. Without input-output linkages in production, the counterfactual increase in world trade with no structural change would be even greater. Finally, the process of structural transformation toward services systematically impedes the gains from trade. JEL codes: F41, L16, O41

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“…The CDE, introduced by Hanoch (1975), can be classified as somewhere between the nonhomothetic CES and more flexible functional forms. It is based on the assumption of implicit additivity and allows for a richer representation of income effects on the demand system.…”

Section: Consumer Demand Elasticitiesmentioning

confidence: 99%

Measuring the economic impacts of trade liberalisation on forest products trade in the Asia-Pacific region using the GTAP model

Stenberg

Siriwardana

2015

Int. Forest. Rev.

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This chapter describes how we obtained the initial estimates for the Global Trade Analysis Project (GTAP) behavioral parameters file. These include the source substitution or Armington elasticities, the factor substitution elasticities, the factor transformation elasticities, the investment parameters, and the consumer demand elasticities. Table 14.1 summarizes for these parameters: the associated notation, the set over which they are indexed, and their description. In this chapter we explain the role of each parameter in the GTAP Model, and describe how we obtained the current settings.Most of the parameters treated here enter directly into the GTAP Data Base. In contrast with the rest of the data file where an extensive and elaborate process of transformation is required to remove any inconsistencies, and repair the omissions in the initial data sets, no such processing is required here for most of the behavioral parameters. For the most part, each individual parameter is an independent datum, which stands or falls on its own, and does not require any consistency checks with other parameters. The one exception to this rule is the consumer demand parameters (see section 14.5). Here we do need to check for consistency conditions -the triad of Engel aggregation, Cournot aggregation and symmetry condition. Also, there is a need to transform the data, from elasticities, for which we find empirical estimates, to the invariant parameters needed for our preferred functional form for the consumer demand system. Elasticities and parameters described in sections 14.1, 14.2, 14.3 and 14.4 have not been changed since the release of GTAP 6 Data Base, while the consumer demand parameters have been updated in this version. Source Substitution ElasticitiesThe GTAP Data Base contains two sets of source substitution elasticities. One relates to the substitution between domestic products and imports, and the other to the substitution between imports from different regions. To define these parameters precisely, we need to refer to the theoretical structure of the GTAP Model. In that model, the source substitution elasticities are defined separately for each of the representative agents within each region rather than referring to a single economy-wide demand behavior, as in the other models. This means that for each commodity within each region, the domestic-import mix is determined separately for each industry, and for each of the final demand categories, namely investment, household consumption, and government consumption. The sourcing of imports is also determined separately for intermediate usage (for all industries together) and for each of the final demand category. Finally, for cross-regional behavior, the GTAP Model assumes that for each commodity, all agents in all regions display the same substitution elasticity.

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Production and Demand Models with Direct or Indirect Implicit Additivity

Cited by 246 publications

References 5 publications

Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data

Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data

Structural Change and Global Trade

Measuring the economic impacts of trade liberalisation on forest products trade in the Asia-Pacific region using the GTAP model

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