Optimism Bias? The Elasticity Puzzle in International Economics Revisited

Trade Adjustment in the European Union - A Structural Estimation Approach

“…the mode, median and the interquartile range, rather than the means and variances of the distributions. The bootstrapping procedure, and the output it generates, are explained in further detail in Corbo and Osbat (2012). Applying Monte Carlo techniques, we also show that the mode and the median of the bootstrap distributions are the least biased measures of the elasticity of substitution, when compared to the bootstrap mean and the 2SLS estimate.…”

“…Second, we make a methodological advancement in applying bootstrap methods to obtain less biased and more robust elasticity measures. As shown in Corbo and Osbat (2012), due to the Feenstra method involving a mapping from estimated reduced-form parameters into the structural parameters of interest via a non-linear mapping function, the obtained estimates are on average biased in large parts of the parameter space. Relying instead on the mode or median of the bootstrap distribution of our estimates considerably reduces this bias.…”

“…However, for some sectors where the elasticity estimates are high, notable differences emerge. As we discuss in more detail in Corbo and Osbat (2012), the problems emerge from the shape of the function mapping the estimated coefficients θ 1cg and θ 2cg (θ X 1cg and θ X 2cg ), in case of import (export) data estimation, into the parameter of interest σ cg (σ X cg ). It is worth emphasizing again that the aforementioned bias does not stem from the estimation of the reduced-form parameters.…”

Influence of demand and supply factors on trade flows: Evidence for Argentina (1996–2016)

“…Similarly, the authors warned that the probability of misspecification of sectoral behavioral functions with respect to aggregate flows also increases. Furthermore, Bajzik et al (2020) emphasized that there is a publication bias against small and statistically insignificant elasticities, which Corbo and Osbat (2012) attributed to elasticity 'overoptimism'.…”

“…Furthermore, Bajzik et al. (2020) emphasized that there is a publication bias against small and statistically insignificant elasticities, which Corbo and Osbat (2012) attributed to elasticity ‘overoptimism'.…”