Report
Bilateral Import Demand Elasticities and Balanced Trade Protection
29 Jun 2026
Abstract
Recognizing that macroeconomic conditions determine aggregate trade imbalances, can tariffs eliminate bilateral trade deficits? The Balanced Trade Tariff Index (BTTI) is introduced as the uniform tariff that closes bilateral deficits while holding macroeconomic conditions fixed. The BTTI depends on bilateral, product-level import demand elasticities estimated using a translog GDP function applied to data from seven major economies. The novel elasticity estimates vary widely across importers, exporters, products, and trade directions. This heterogeneity lowers average implied tariffs relative to homogeneous-elasticity benchmarks, yet implies substantially higher tariffs are required for exporters of inelastic products, underscoring the limits of tariffs for balancing trade.
Metrics
1 Record Views
Details
- Title
- Bilateral Import Demand Elasticities and Balanced Trade Protection
- Creators
- Hiau Looi Kee - World BankIleana Cristina Constantinescu Neagu - World BankYoto V. Yotov - Drexel University
- Resource Type
- Report
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Other Identifier
- 991022193874104721