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Elasticity of Substitution and Antidumping Measures

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  • Jørgen Drud Hansen, Syddansk Universitet
  • ,
  • Philipp Meinen, Denmark
  • Jørgen Ulff-Møller Nielsen, Denmark
Abstract
This paper analyzes the role of the elasticity of substitution for anti-dumping decisions across countries. In monopolistic competition models with cost heterogeneous firms across countries, price differences vary inversely with the elasticity of substitution. Anti-dumping duties should therefore also vary inversely with the elasticity of substitution at least for countries which have a strong focus on prices in the determination of their anti-dumping measures. We test this for ten countries from 1990 to 2009 using data on anti-dumping from Chad Bown (2010) and US-data at 8-digit level for elasticity of substitution from Broda and Weinstein (2006). Applying the ‘lesser duty rule’ in duty determination indicates more attention to prices, and we therefore group the ten countries into those which use ‘the lesser duty rule’, such as the EU, and those which do not, such as the US. The results in our empirical investigation support the predicted role of the elasticity of substitution as we find a significant negative relation between the elasticity of substitution and the final anti-dumping duties for the ‘lesser duty rule’ group of countries. The countries which do not follow the ‘lesser duty rule’ seem to base their duty determination on a broader approach, and the elasticity of substitution is not found significant for the final anti-dumping duties for this group of countries.
Original languageEnglish
Publication year13 Sep 2012
Number of pages23
Publication statusPublished - 13 Sep 2012
EventETSG 2012 - Leuven, Belgium
Duration: 13 Sep 201215 Sep 2012

Conference

ConferenceETSG 2012
CountryBelgium
CityLeuven
Period13/09/201215/09/2012

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