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Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES‐based Gravity Approach?
Author(s) -
Gohin Alexandre,
Féménia Fabienne
Publication year - 2009
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2009.00199.x
Subject(s) - economics , constant elasticity of substitution , homothetic transformation , econometrics , substitution (logic) , monotone polygon , gravity equation , elasticity of substitution , gravity model of trade , bilateral trade , microeconomics , mathematics , international trade , production (economics) , computer science , geometry , china , law , political science , programming language
The main objective of this article is to examine econometric estimates of price elasticities of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, Constant Elasticity of Substitution (CES) preferences. We test all these assumptions using intra‐European trade in cheese. In general, the assumptions made on preferences by the gravity approach are not supported by our dataset. The bias induced in the estimated price elasticities is ambiguous.