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

Author/Editor: Mika Saito
Publication Date: February 01, 2004
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 04/22

Author's Keyword(s): The Armington Model | Intermediate Inputs Trade | Panel Data
Publication Date: February 01, 2004
ISBN/ISSN: 9781451921380/1018-5941 Format: Paper
Stock No: WPIEA0222004 Pages: 39
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