Value-added share and elasticity of trade to barriers

ABSTRACT

Trade flows, either measured as gross trade or flows of value-added, tend to be less sensitive to trade barriers in industries that feature a greater share of value-added in its product. Gross trade is, in general, more sensitive to trade barriers than the trade in value-added does. The differences between the elasticities of gross trade and value-added trade with respect to distance tend to be smaller for industries with a higher share of value-added in its product.

KEYWORDS:

• Value-added share
• gross trade
• trade in value-added
• trade elasticity

JEL CLASSIFICATION:

• F10
• F19

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ For example, Krugman (1980) and Chaney (2008) show that the trade elasticity of barriers is determined by the substitutability between goods. Berthelon and Freund (2008) find empirical evidence that the elasticity of trade to distance is related to the substitutability of goods and the level of trade costs.