ARMINGTON MODELS AND TERMS-OF-TRADE EFFECTS - SOME ECONOMETRIC EVIDENCE FOR NORTH-AMERICA

Elasticities of substitution among U.S. imports from Mexico, Canada, t he rest of the world, and competing domestic production are estimated for twenty-two mining and manufacturing sectors, based on quarterly da ta for 1980-8. These elasticities will provide a benchmark for CGE mod els of North American trade liberalization. We also find that estimate d Armington elasticities are low and, therefore, researchers may want to reconsider the device of using high values of Armington elasticitie s in multicountry CGE models to avoid large terms-of-trade losses asso ciated with preferential trade liberalization.