English, Article edition: Aggregation Problems in Estimates of Armington Elasticities and Pass-Through Effects Jorge Chami Batista; Nelson Isaac Abrahão Junior

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Aggregation Problems in Estimates of Armington Elasticities and Pass-Through Effects
Author
  • Jorge Chami Batista
  • Nelson Isaac Abrahão Junior
Physical Description
  • article
Notes
  • This article examines the level of aggregation problem for which Armington price elasticity of substitution and pass-through effects are usually estimated. On the basis of U.S. import data from 1995 to 2004 of wood products from Brazil and Mexico, it is argued that the usuallevels of aggregation used in the estimates for the elasticity of substitution are too high, since they tend to aggregate perfectly elastic products together with products whose elasticities vary from zero to any negative number. Analogously, the elasticity of relative prices with respect to the exchange rate, a measure of the pass-through effect, tends to be underestimated in the U.S. by the presence of homogeneous products whose prices are set in dollars and tend to equalize through arbitrage. Therefore, pricing-to-market estimates may be grossly overestimated for some industries in the U.S.
  • Homogeneous Products, Differentiated Product, Pass-Through, Pricing-to-Market, Law of One Price
  • RePEc:anp:econom:v:6:y:2005:i:2:p:329-355
Language
  • English
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