Working Paper: NBER ID: w11719
Authors: Menzie D. Chinn
Abstract: This paper re-examines aggregate and disaggregate import and export demand functions for the United States. This re-examination is warranted because (1) income elasticities are too high to be warranted by standard theories, and (2) remain high even when it is assumed that supply factors are important. These findings suggest that the standard models omit important factors. An empirical investigation indicates that the rising importance of vertical specialization combined with decreasing tariffs rates explains some of results. Accounting for these factors yields more plausible estimates of income elasticities, as well as smaller prediction errors.
Keywords: No keywords provided
JEL Codes: F12; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| vertical specialization (L23) | income elasticities of trade flows (F14) |
| decreasing tariff rates (F13) | income elasticities of trade flows (F14) |
| income elasticities of trade flows (F14) | import demand functions (D12) |
| income elasticities of trade flows (F14) | export demand functions (F10) |
| supply-side variables (E23) | magnitude of income elasticities (F40) |
| investment in equipment and software (E22) | capital goods exports (F14) |
| tariff rates (F13) | capital goods exports (F14) |