The Use of Literature Based Elasticity Estimates in Calibrated Models of Trade-wage Decompositions: A Calibmetric Approach, Issue 10137
How to best utilize the wide range of estimates of elasticities that characterize econometric literature when using calibrated models is the issue we address here through a blending of econometrics and calibration into calibmetrics. Econometrically generated literature based elasticity parameters are typically used in calibrated models a very simple manner, appealing to a single value. Here we explicitly incorporate the full range of values of elasticities yielded by econometric studies in both the calibration procedure employed and the uses made of a calibrated model. This is important because the ranges for such values can be large. This allows us to assess how uncertainty in exogenously specified parameter values affects the performance of calibrated models, and how much added information is obtained by using the full range of literature estimates of key parameters in calibration.
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Abrego and Whalley assess Bureau of Economic Calculations of Joint calibrated models Cobb-Douglas decomposition results density of unity econometric estimates Economic Research elasticity parameter values elasticity value estimates of elasticities Factor endowment factor-biased technical change fixed factor full range Hamermesh 1993 Hicks-neutral technical change Hui Huang Implied Joint Density2 instructions inside John Whalley Joint Wage Change likelihood calculations likelihood of observing Literature Based Elasticity literature estimates lognormal distribution Market Clearing Massachusetts Avenue model structure National Bureau NBER Working Papers observed wage change papers in hard Partial Subscription period range of elasticity range of estimates range of literature Range of wage relative wage change returns to scale Roland G sector Sensitivity of Likelihood Sheridan Titman single value skilled and unskilled skilled to unskilled skilled-unskilled labour substitution small open economy total density trade shock Trade-Wage Decompositions uniform density function unskilled intensive unskilled labour unskilled wage rates wage inequality world prices