G2TT
来源类型Discussion paper
规范类型论文
来源IDDP16762
DP16762 Poor Substitutes? Counterfactual methods in IO and Trade compared
Keith Head; Thierry Mayer
发表日期2021-11-29
出版年2021
语种英语
摘要Constant elasticity of substitution (CES) demand for monopolistically competitive firm-varieties is a standard tool for models in international trade and macroeconomics. Inter-variety substitution in this model follows a simple share proportionality rule. In contrast, the standard toolkit in industrial organization (IO) estimates a demand system in which cross-elasticities depend on similarity in observable attributes. The gain in realism from the IO approach comes at the expense of requiring richer data and greater computational challenges. This paper uses the dataset of Berry et al. (1995), who established the modern IO method, to simulate counterfactual trade policy experiments. We use the CES model as an approximation of the more complex underlying demand system and market structure. Although the CES model omits key elements of the data generating process, the errors are offsetting, leading to reasonably accurate counterfactual predictions. For aggregate outcomes, it turns out that incorporating non-unitary pass-through matters more than fixing over-simplified substitution patterns. We do so by extending the commonly used methods of Exact Hat Algebra and tariff elasticity estimation to take into account oligopoly.
主题Industrial Organization ; International Trade and Regional Economics
关键词Constant elasticity of substitution Industrial organization Oligopoly Trade Tariffs Counterfactual analysis
URLhttps://cepr.org/publications/dp16762-0
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/545696
推荐引用方式
GB/T 7714
Keith Head,Thierry Mayer. DP16762 Poor Substitutes? Counterfactual methods in IO and Trade compared. 2021.
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