Armington elasticity and development

Purba Mukerji*, John Struthers

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

We model trade competitiveness over the course of economic development, by focusing on real world links between technology, market shares, and consumers’ demand for technology products. Our starting point is the Armington elasticity (AE) which is the standard way to represent region-specific preferences in international trade; however, a great drawback is that it is assumed fixed. Our paper contributes by modeling the role of technological and economic progress in evolution of AE. This framework has theoretical and policy applications. We provide illustrations of how the framework can be used to analyze the conditions for successful government policy interventions in trade. Specifically we model supply and demand sides: (1) technological progress influencing AE, as substitution becomes easier when varieties embody similar technology and (2) steadier demand for technology intensive products as the economy develops and incomes rise.
Original languageEnglish
Number of pages21
JournalJournal of Industry, Competition and Trade
Early online date25 Apr 2020
DOIs
Publication statusE-pub ahead of print - 25 Apr 2020

Keywords

  • armington elasticity
  • economic development
  • technological progress
  • trade policy

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