Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203238
Authors: 
Bajzik, Josef
Havránek, Tomáš
Irsova, Zuzana
Schwarz, Jiri
Year of Publication: 
2019
Series/Report no.: 
IES Working Paper 19/2019
Abstract: 
A key parameter in international economics is the elasticity of substitution between domestic and foreign goods, also called the Armington elasticity. Yet estimates vary widely. We collect 3,524 reported estimates of the elasticity, construct 34 variables that reflect the context in which researchers obtain their estimates, and examine what drives the heterogeneity in the results. To account for inherent model uncertainty, we employ Bayesian and frequentist model averaging. We present the first application of newly developed non-linear techniques to correct for publication bias. Our main results are threefold. First, there is publication bias against small and statistically insignificant elasticities. Second, differences in results are best explained by differences in data: aggregation, frequency, size, and dimension. Third, the mean elasticity implied by the literature after correcting for both publication bias and potential misspecifications is 3.
Subjects: 
Armington
trade elasticity
meta-analysis
publication bias
Bayesian model averaging
JEL: 
C83
D12
F14
Document Type: 
Working Paper
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