Technical Report Japan–Korea Trade Liberalization Revisited: The Role of Armington Elasticities

Kim, Jiyoung  ,  Nakano, Satoshi  ,  Nishimura, Kazuhiko

6652017-04 , Institute of Developing Economies (IDE-JETRO)
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.

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