Date of Award:

1978

Document Type:

Dissertation

Degree Name:

Doctor of Philosophy (PhD)

Department:

Economics and Finance

Advisor/Chair:

Terrence F. Glover

Abstract

The growing importance of trade internationally as well as for the United States (U.S.) spawned a body of literature concerning import demand, export supply, and trade balance. Most of the empirical work to date has employed estimates of commodity import demand functions derived from traditional linear and log-linear functional forms. These specifications of import demand impose separability restrictions on the consumer's choice between domestic and foreign goods, in addition to confining import demand elasticities to constant values. The policy recommendations made on the basis of the import demand elasticities derived from these traditional models may be misleading. In this study, a more flexible model of import demand is employed. The model allows a more flexible characterization of the underlying preference structure for both domestic and imported commodities. Import demand functions are then derived from the underlying model which possess the properties of the flexible characterization of consumer preference. Wheat import data by major source of supply to selected EEC countries and Japan are used to estimate the parameters of the derived wheat import demand relationships.

The results of the estimation and tests suggest that the use of the traditional restricted model may be suspect even though such models are easily used in the analysis of trade policy. The traditional model was rejected by use of a likelihood ratio test of model specifications for all import demand functions for the selected importing countries analyzed. This suggests that the associated import demand and income elasticities are not constant but variable (derived from each data point) in contrast to previous assumptions regarding the behavior or import demand and associated elasticities. The compensated own-price elasticities of import demand for U.S. wheat in the Netherlands and Japan were found to be generally inelastic, close to unitary elastic in the United Kingdom (U.K.), and elastic in the Italian market during the time period studied. These estimated elasticities were then used to analyze the impacts of selected trade policies such as export subsidies and taxes, tariff reductions and threshold price systems, quotas and price stabilization.

Included in

Economics Commons

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