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A Comparison of Sectoral Armington Elasticity Estimates in the Trade Literature

Author(s)

Saad Ahmad, Christopher Montgomery, Samantha Schreiber


Abstract

The Armington elasticity is one of the key parameters in quantitative trade models, as it determines the level of substitutability between domestic and imported varieties of a good in a country. Estimates of this key parameter have been provided by several empirical studies using different methods and data sources. Our goal in this paper is to summarize and compare Armington elasticity estimates that are available at the sector level. We first discuss some of the most commonly used methods for estimating Armington elasticities, as well as the main advantages and challenges associated with each approach. We then compare these Armington elasticity estimates at the sector level and assess if different levels of aggregation are driving the observed differences across studies. We find that the different estimation strategies, in combination with different levels of sectoral aggregation, have contributed to the wide range of elasticity estimates in the literature.