Outdated assumptions on U.S. imports lead to biased economic estimates.
The article examines U.S. import behavior over 1965-1987, finding that traditional econometric models have limitations. By using a new model that considers both import volumes and prices simultaneously, the researchers show that assuming trade elasticities are fixed and ignoring cross-price effects can lead to biased estimates. The study suggests that understanding how prices are set in different export markets is crucial for accurately predicting import behavior.