Elasticities in International Trade: Theoretical and Methodological Issues

Abstract

This paper is a survey of recent research on specification, estimation and evaluation of trade elasticities. Since our focus is primarily methodological we do not give a compendium of recent estimates. Given the excellent and comprehensive nature of previous surveys, the marginal benefit of doing so would be small. In addition, we shall argue that any hope of obtaining a consensus of parameter values from trade equations must rely on taking a different approach. The approach involves using (and allowing the reader to use) as much information as is practically possible. There are both theoretical and econometric reasons to pursue such an approach, and we shall focus on studies which clarify them.