Importer-Specific Elasticities of Demand: Evidence from State-Level U.S. Exports

Abstract

This paper investigates whether the elasticity of demand systematically changes from one importer country to another in an international trade context. Evidence from U.S. exports supports this view by suggesting that the elasticity of demand in an importer country among the products purchased from the U.S. significantly decreases in GDP per capita and distance to the U.S. of the importer country. In terms of policy implications, using a common elasticity measure would overestimate the gains from reducing trade costs with developed or distant countries and underestimate them with developing or remote countries.