Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153968
Authors: 
Corbo, Vesna
Osbat, Chiara
Year of Publication: 
2013
Series/Report no.: 
ECB Working Paper 1535
Abstract: 
We estimate the elasticity of substitution of a country’s imports, and that of its exports on the world market, for EU countries using sector level trade data. We present a new empirical strategy based on the identification scheme by Feenstra (1994), which enables the estimation of elasticities from data on exports. Moreover, our use of bootstrap methods allows us to obtain better elasticity measures, and to better characterize their accuracy. Our results show much heterogeneity in the estimates of the elasticity of substitution across industrial sectors. This, in turn, points to heterogeneity across countries, due to different production and trade structures. We obtain aggregate elasticities for the EU27 countries, with a mean of 3.5 for imports and 4.0 for exports, bringing us closer to traditional estimates and bridging the gap between the newer micro data estimates and the more traditional estimates found in the macroeconomic literature.
Subjects: 
Aggregation
calibration of macroeconomic models
Elasticity of Substitution
heterogeneity
JEL: 
C23
F14
F47
Document Type: 
Working Paper

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