College of Economics and Management, Nanjing Agricultural University | Laboratory of Quantitative Food Economic Analysis, Division of Agricultural and Resource Economics, Department of Agricultural and Resource Economics, Faculty of Agriculture, Kyushu University
The elasticity of trade flows with respect to trade costs involve important implications that quantify welfare gains from trade and predict the effects of trade policy on trade flows. The major purposes of this study are to estimate China’s agricultural trade–cost elasticity and to analyze its heterogeneity across different types of trading partners. A micro–founded method based on the translog gravity model developed by Novy (2013) is applied to measure the trade–cost elasticity of China’s agricultural products using a panel dataset of its major trading partners. First, the estimation results show that there was an obviously negative relationship between the import share of trading partners with respect to China’s agricultural products and its corresponding trade–cost elasticity. Specifically, the higher the import share of trading partners with respect to China’s agricultural products, the lower the weighted average trade–cost elasticity. Second, the weighted average trade–cost elasticity of aggregate agriculture experienced a rapid downward trend from 1996 to 2016. The trade–cost elasticity fell from 13.68 in 1996 to 6.54 in 2016. Finally, the trade–cost elasticity measure presents significant heterogeneity across various types of trading partners.
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