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Abstract
Countries and regions within countries frequently import and
export from the same standard industrial classification (SIC) groupings.
In describing international trade, the Armington assumption recognizes
that imported goods may substitute imperfectly for domestically produced
goods. Imports and domestically produced goods may differ in
quality or composition. Elasticities of import substitution have been extensively
estimated for international trade but limited information is
available on elasticities of substitution for regional imports. One h ypothesis
in the literature is that international trade elasticities should be
considered as lower bounds for regional trade elasticities presumably
because of fewer non-price trade restrictions. This research estimates regional
elasticities of import substitution for 20 two-digit groupings using
commodity trade date in the U.S. The range in elasticities is from 0.45 to
2.80 depending on the characteristics of the SIC grouping. These results
tend to refute the hypothesis that international trade elasticities are
lower bounds for regional trade elasticities for comparable goods.