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Armington Elasticities in Intermediate Inputs Trade: A Problem in Using Multilateral Trade Data

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  • Mika Saito

Abstract

This paper finds that the estimates of Armington elasticities (the elasticity of substitution between groups of products identified by country of origin) obtained from multilateral trade data can differ from those obtained from bilateral trade data. In particular, the former tends to be higher than the latter when trade consists largely of intermediate inputs. Given that the variety of intermediate inputs traded across borders is increasing rapidly, and that the effect of this increase is not adequately captured in multilateral trade data, the evidence shows that the use of multilateral trade data to estimate Armington elasticities needs caution.

Suggested Citation

  • Mika Saito, 2004. "Armington Elasticities in Intermediate Inputs Trade: A Problem in Using Multilateral Trade Data," IMF Working Papers 2004/022, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/022
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    More about this item

    Keywords

    WP; industry; goods industry; The Armington Model; Intermediate Inputs Trade; Panel Data; trade data; industry Data; food products industry; industry-specific volume; equipment industry; inputs industry; gross output; Manufacturing; Agricultural commodities; Multilateral trade; Plurilateral trade; Imports; Global;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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