Estimation of Armington elasticities for trade-policy analysis
Journal of Chinese Economic and Foreign Trade Studies
ISSN: 1754-4408
Article publication date: 7 May 2020
Issue publication date: 18 May 2020
Abstract
Purpose
The purpose of this paper is to compare the Armington elasticities for world average values and country-specific values and obtain evidence for whether the world average elasticities and the “rule of two”, which have been applied in many papers, are accurate for cereals in trade policy studies related to an individual country.
Design/methodology/approach
The authors use panel data with a nested model to estimate and compare Armington elasticities based on world average values and country-specific values from 10 countries and regions.
Findings
The results suggest that cereals’ elasticities vary between world average values and country-specific values, and the “rule of two” is not strictly applicable. In fact, the “less than two” concept fits well in many cases.
Originality/value
This study sheds light on the effects of country heterogeneity on the elasticities and the accuracy of using world average elasticities in a trade policy study for an individual country. In addition, this paper offers estimated values of country-specific elasticities for 10 countries and regions.
Keywords
Acknowledgements
This work is financially supported in part by the scholarship from China Scholarship Council (CSC) under the Grant code – CSC201806350228. Our deepest gratitude goes first and foremost to Professor Yueying Mu from China agricultural university for her constant writing assistance.
Citation
Liu, K., Yamazaki, M. and Koike, A. (2020), "Estimation of Armington elasticities for trade-policy analysis", Journal of Chinese Economic and Foreign Trade Studies, Vol. 13 No. 1, pp. 21-35. https://doi.org/10.1108/JCEFTS-12-2019-0066
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited