Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/330295 
Year of Publication: 
2025
Series/Report no.: 
CITP Working Paper No. 026
Publisher: 
Centre for Inclusive Trade Policy (CITP), University of Sussex Business School, Brighton
Abstract: 
This paper investigates the trade elasticity, a key parameter in international economics, and examines biases in its estimation arising from dynamic treatment effects and staggered adoption. Leveraging the 2018 US trade war tariffs as a natural experiment, I apply a local projections difference-in-differences approach, estimating a short-run elasticity of -1.4 and a long-run elasticity of -3.7, with adjustments stabilising within 15 months. Failing to account for staggered adoption or dynamics introduces a downward bias of approximately 50%. I also propose a novel correction to the estimation of dynamic multipliers to cumulative policy changes in the presence of staggered treatment timing. This correction eliminates a systematic bias that can otherwise distort estimates.
Document Type: 
Working Paper

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