An official website of the United States government
United States Department of Labor
United States Department of Labor
The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information,
make sure you're on a federal government site.
The site is secure.
The
https:// ensures that you are connecting to the official website and that any
information you provide is encrypted and transmitted securely.
Office of Survey Methods Research
SHARE ON:
More Information
Published Year: 2018
Survey/Program(s): Office of Prices and Living Conditions
Catalog: Economic Working Paper
WP Number: WP-508
Publication Status / Disposition: Office of Prices and Living Conditions (September 2018).
Download PDF
The Double EMG Distribution and Trade Elasticities
Abstract
Using Brazilian export data that, unlike many trade data sets, keep a full record of small export sales, this paper reconsiders trade elasticities and the welfare gains from trade. Using the Brazilian data, this paper provides novel evidence on the properties of the distributions of log-export sales and shows that the Double Exponentially Modified Gaussian (EMG) distribution parsimoniously captures these properties. Using the Double EMG distribution in a standard monopolistic competition model of trade, this paper demonstrates that data truncation, that is prevalent in many data sets, leads to an upward bias in measuring the partial elasticity of trade with respect to variable trade costs. This bias subsequently leads to the underestimation of the gains from trade by 1% to 9% depending on the extent of data truncation, a range that is commensurate with typical economic growth and large booms.