Séminaire COURNOT – Gabriel Smagghue (Banque de France)
De 14:00 à 15:30
Détails de l'événement :
Titre : Gravity beyond CES: Implications for Substitution Patterns and Welfare?
Résumé : We derive a linear structural gravity equation that allows for rich substitution patterns across varieties, based on observable product characteristics. To achieve this, we take advantage of recent econometric work to linearize an import demand system with mixed CES preferences. Compared to traditional gravity models, the resulting equation features additional regressors that capture the role of product differentiation in the patterns of substitution across exporters. Importantly, this equation can be easily estimated through two stage least squares (2SLS) and without additional data requirements relative to traditional gravity. We implement this method using bilateral trade data and find that the data strongly rejects the Independence of Irrelevant Alternative (IIA) assumption implied by standard trade models: we find an important role for vertical and geographical differentiation so that exporters with similar prices, or originating from similar regions, are closer substitutes. We show that this pattern has important implications in the context of the recent US-China trade war, in which our model can correctly predict which countries benefit the most from the reallocation of trade flows due to US tariffs on Chinese imports.
Lieu du séminaire : Salle du Conseil Paul Chamley et ZOOM.
Agenda des séminaires : https://www.beta-economics.fr//seminaires-cournot-2022-2023/