Philippidis, G. , Resano, H. , Sanjuan, A. I.
No
Econ. Model.
Article
Científica
0.827
0.688
01/06/2014
000337852400003
This paper examines the 'small share' problem inherent within the constant elasticity of substitution Armington specification. As a de facto research tool in the quantitative trade literature, this structural bias plagues the results of numerous multi-region CGE studies. Kuiper and van Tongeren (2006) proposed a fusion of gravity and CGE specifications to remedy said bias, which the current paper further develops. With a pervasiveness of 'small-share' examples on Mercosur-European Union trade owing to the latter's restrictive tariff regime, the results reveal that significant additional trade led gains to Mercosur under a potential preferential trade agreement when compared with the standard Armington treatment. (C) 2014 Elsevier B.V. All rights reserved.
Small shares; Armington function; International trade; Gravity equation; CGE models