Measuring the Price Elasticity of Import Demand in the Destination Markets of Italian Export

49 Pages Posted: 27 Mar 2011

Date Written: October 14, 2010

Abstract

The aim of this paper is to compare the price elasticity of import demand in the destination markets of Italian exports to the price elasticity in the destination markets of the other main euro-area countries’ exports. To this end, we use the elasticities of substitution across varieties estimated for each destination market (defined as a country-product combination) by Broda, Greenfield and Weinstein (2006). We find that Italy exports to markets which have, on average, a lower price elasticity than the markets where France, Germany and Spain sell their exports. The result is mainly driven by the motor vehicle and other transport equipment sectors. Net of these two industries, the export elasticities of the four countries are basically identical. The sectoral and geographical composition of Italian exports therefore does not seem to expose them to a relatively more elastic demand, contrary to the indications of part of the literature.

Keywords: exports, elasticity of substitution, Armington varieties, international specialization, price elasticity of exports

JEL Classification: F12, F14

Suggested Citation

Felettigh, Alberto and Federico, Stefano, Measuring the Price Elasticity of Import Demand in the Destination Markets of Italian Export (October 14, 2010). Bank of Italy Temi di Discussione Working Paper No. 776, Available at SSRN: https://ssrn.com/abstract=1792498 or http://dx.doi.org/10.2139/ssrn.1792498

Alberto Felettigh (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Stefano Federico

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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