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In Search of the Armington Elasticity

Robert C. Feenstra1; Philip Luck2; Maurice Obstfeld3; K. Russ1

1 UC Davis and NBER · 2 CU Denver · 3 UC Berkeley, NBER, and CEPR

The Review of Economics and Statistics 2018

How big is the elasticity of substitution between goods from different countries—the Armington elasticity? Estimates of the macroelasticity between home and imported goods are often smaller than the microelasticity between foreign sources of imports. Using new, highly disaggregate U.S. production data matched to imports and simulated data from a Melitz-style model with nested CES preferences, we explore estimation techniques for the two elasticities. For between two-thirds and three-quarters of sample goods, there is no significant difference between the macro- and microelasticities, but for the rest, the microelasticity is significantly higher, even at the same level of disaggregation.

DOI
10.1162/rest_a_00696
Volume
100 (1)
Pages
135-150
Language
en
Export
BibTeX
Sources
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