Ana Cristina de Souza Pedroso’s research while affiliated with Instituto de Pesquisa Econômica Aplicada - IPEA and other places

In this article we estimate substitution elasticities for goods distinguished by place of production, specifying whether they are imported or produced domestically. These are known as the Armington (1969) elasticities and are widely used to assess the impact on the domestic economy of policy changes in countries’ tariff structures; and, in particular, to evaluate the costs and benefits of signing free trade agreements. The sample period for our study is 1986-2002, and the estimation is done separately for each of the 28 industrial sectors specified in the Brazilian input-output table. Special consideration is given to the fact that the data is affected by import restrictions for part of that period, and that foreign trade liberalization occurred in Brazil in 1990. The estimation procedure is automated and takes into consideration the stochastic dynamic properties of the quantity and price series, using the appropriate estimation approach in each case. The Armington elasticities we estimate have the correct sign, and are significant at the 5% level for 20 sectors, at 10% for two sectors, and at 20% for two others. In one sector the estimated value is significant, but has the incorrect sign (negative). For three sectors the estimated elasticity is not significantly different from zero; but these represent only 12% of the average value of total import value in the period 1997-2002. The point estimate of the elasticity of substitution, for the sectors where it is positive and statistically different from zero, varies from 0.16 to 3.6; and its weighted average value is 0.93.

This book contains a selection of studies discussed at the first and second Regional Meetings on Computable General Equilibrium, which were held, respectively, in Santiago, Chile on 13 and 14 April 2007 with the collaboration of the Centre for International Prospective Studies and Information (CEPII), and San Jose, Costa Rica, from 24 to 25 November 2008, with the collaboration of the Central American Institute of Business Administration (INCAE). They deal with issues such as trade policy, regional integration, trade in services, fiscal policy, the impact of food price surges and climate change; are based on comparable methodologies; and shed light on the implications of crucial policy alternatives that Latin American regional policymakers are currently facing. With this publication, ECLAC and IDB hope to disseminate the studies broadly among policymakers and to encourage new generations of modelers to further analytical work in this area.

In this article we estimate substitution elasticities for goods distinguished by place of production, specifying whether they are imported or produced domestically. These are known as the Armington (1969) elasticities and are widely used to assess the impact on the domestic economy of policy changes in countries’ tariff structures; and, in particular, to evaluate the costs and benefits of signing free trade agreements. The sample period for our study is 1986-2002, and the estimation is done separately for each of the 28 industrial sectors specified in the Brazilian input-output table. Special consideration is given to the fact that the data is affected by import restrictions for part of that period, and that foreign trade liberalization occurred in Brazil in 1990. The estimation procedure is automated and takes into consideration the stochastic dynamic properties of the quantity and price series, using the appropriate estimation approach in each case. The Armington elasticities we estimate have the correct sign, and are significant at the 5% level for 20 sectors, at 10% for two sectors, and at 20% for two others. In one sector the estimated value is significant, but has the incorrect sign (negative). For three sectors the estimated elasticity is not significantly different from zero; but these represent only 12% of the average value of total import value in the period 1997-2002. The point estimate of the elasticity of substitution, for the sectors where it is positive and statistically different from zero, varies from 0.16 to 3.6; and its weighted average value is 0.93.

We estimate the Armington elasticity for the 28 industrial sectors of the Brazilian input-output table, for the period 1986–2002. The methodology we use takes into account the stochastic properties of the data series, and the effects of the Brazilian foreign trade liberalization that occurred in 1990. We obtain statistically significant estimates of the elasticities for 24 sectors, and their estimated values are in the interval 0.2 to 3.6, with a weighted average of 0.9. For tree sectors the estimated elasticity is not significantly different from zero, and for one sector we find a significant elasticity, but it has the wrong sign.

The structure introduced by Armington (1969) has been used to analyze trade policy in partial and general equilibrium models. The Armington elasticities, the degree of substitution between domestic and import goods are known to be important, but are seldom estimated empirically. Therefore, we estimate them for 28 industrial sectors, based on the Brazilian Input-Output table over the period 1986-2000. Initially we discuss the construction of the data set and the treatment that was given to the relative prices, for taking into account the trade liberalization initiated in 1990. According to the dynamic properties of the data we estimate four different econometric models. 25 out of the 28 sectors had positive and significant Armington estimates that were significant at the ten-percent level. They range between 0,16 e 4,95, which reflects the different degree of substitutability between domestic and import goods in the Brazilian industry.