Tariff-based product-level trade elasticities

Wine: The punching bag in trade retaliation

“…Focusing on wine, Raimondi and Olper (2011) also estimate a gravity equation of trade as we do using tariff data to recover the elasticity of substitution, finding values ranging from 2.183 (obtained from a Tobit model of log-linearized trade flows) to 9.448 (from a PPML model using only non-zero trade flows). Most related to our findings are the comparable estimates of Fontagné et al (2022), who also use tariff data and a gravity approach at the 6-digit HS level to compute elasticities of 5.14 for bottled wine and 2.32 for bulk wine, which are somewhat above our estimates.…”

“…To assess the sensitivity of our econometric and simulation results to various attributes of the sample, we explore several alternative specifications to verify the robustness of our results. Namely, we estimate different specifications by considering (1) a gravity model without bilateral country-pair fixed effects (comparable to the specifications of Fontagné et al 2022 andRaimondi 2008), using standard bilateral controls including distance and indicators for common border, common language, and historical colonial relationship in their place (data from the USITC gravity dataset); (2) data measured at four-year intervals (as opposed to three-year intervals in the baseline) over the years 2002, 2006, ..., 2018; (3) data measured at five-year intervals over the years 2003, 2008, ..., 2018; (4) a specification excluding countries with a majority of the population that does not consume wine for religious reasons; and (5) the inclusion of international border effects interacted with time indicator variables to measure the long-run effects of globalization on international wine trade. For comparison, we include our baseline gravity estimates for both commodities as given in Table 3.…”

“…It is important to note the key differences between our approach and those of Raimondi and Olper (2011) and Fontagné et al (2022). Raimondi and Olper's estimates are obtained using a cross section of trade flows, obliging them to account for bilateral trade costs with standard proxies such as distance, shared borders, and common language.…”

Heterogeneous Trade Effects of Pre-Shipment Inspections

“…However, we run several robustness checks controlling explicitly for bilateral applied tariffs, and despite the considerable reduction in the estimation sample our results hold. Moreover, bilateral product specific tariffs have very small time variation -see Fontagné et al (2022) -and the inclusion of ijk fixed effects reported in a further set of robustness checks would control de facto for bilateral applied tariffs. Controlling for bilateral applied tariffs -directly or de facto by ijk fixed effects -captures any preferential market access relationship granted by the presence of a Preferential…”

A new dataset on product-level trade elasticities

“…The trade elasticity estimations described in this article base on the idea that the imposition of tariffs increases the price of imports (under the assumption of full pass-through), and therefore affect the import demand. This paper adds to the related research paper (Fontagné, Guimbard and Orefice [1] ) by providing a careful discussion of the empirical distribution of the product level trade elasticities and the associated database.…”