Armington elasticity

Armington elasticity

An Armington elasticity is an economic parameter commonly used in models of consumer theory and international trade. It represents the elasticity of substitution between products of different countries, and is based on the assumption made by Paul Armington in 1969 that products traded internationally are differentiated by country of origin.

The Armington assumption has become a standard assumption of international CGE models. These models generate smaller and more realistic responses of trade to price changes than implied by models of homogeneous products [Deardorff's Glossary of International Economics [http://www-personal.umich.edu/~alandear/glossary/] ] .

References

Armington, Paul, 1969, "A Theory of Demand for Products Distinguished by Place of Production", International Monetary Fund Staff Papers, XVI (1969), 159-78.


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