Japan–Korea Trade Liberalization Revisited:The Role of Armington Elasticities
The elasticity of substitution between foreign and domestic products, i.e., Armington elasticity, is measured by way of two-state calibration according to the temporally distant observations of the market shares, and associated price changes. Along with the sector-wise multifactor CES elasticity estimated using the linked input-output tables, we integrate domestic production of the two countries (Japan and the Republic of Korea) with bilateral trades and construct a bilateral general equilibrium model. Thereupon, we perform an economic assessment of trade liberalization between the two countries.
Keywords: Linked Input-Output Tables, Two-state Calibration, Tariff Elimination,
JEL classification: D57, D58, F24
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