Related paper:

Fontagné, L., Martin, P. and G. Orefice (2018) "The international elasticity puzzle is worse than you think", Journal of International Economics 115: 115-129.

Key results: Average Export Trade Elasticity -5.17

Abstract: Trade elasticity can be estimated at different levels of disaggregation ranging from the sector to the product or even the variety. In the latter case, it has to be estimated at the level of individual exporters using transaction-level custom data. A variety is then defined as a product-firm pair, with the challenge that export prices and export quantities are endogenous at the firm level. We address this endogeneity issue in this paper. We use a firm level time varying instrumental variable for export prices and estimate firm-level trade elasticity to this price. Importantly, annual variations in prices are not synchronized across firms due to the peculiarities of the opening of the electricity market to competition in France. The firm level electricity cost shocks are related to factors exogenous to its export performance (regulation changes, year and length of beginning of contracts, national and local tax changes, location, changes in both market and regulated prices and local weather) and are likely to affect its export performance only through the firm export price. The export price elasticity is around 5.

Data and estimation highlights:

• 11,000 French exporters matched with annual survey on energy consumption and intermediate consumptions.
• Universe of destinations, yearly transaction level data, 1996-2010
• Firm-destination fixed effects and year fixed effects
• Additional controls : Real Exchange Rate (RER), tariffs, Effective RER, Employment and GDP

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