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An Armington Assumption Approach To Model International Trade Flow And Market Share For Apples In Canada

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  • Haq, Zahoor Ul
  • Ishaq, Muhammad

Abstract

The purpose of this study is to estimate elasticities of substitution for apples imported from US, New Zealand and Chile. The study also tested the impact of NAFTA on the apple trade using trade data from 1988 to 2004. The assumptions of Armington model are used to model trade flow of apples employing Linear Approximate of Almost Ideal Demand System. NAFTA has a significant affect on the exporters' share of Canadian import market. Further, New Zealand is emerging one of the strong exporters of apples to Canada by gaining most of the share lost by other countries. Import demand of apples in the case of New Zealand and Chile are elastic while just above unit elastic in case of US. Apples imported from New Zealand were complements to those imported from Chile. The elasticities of substitution of New Zealand and Chile are statistically significant and slightly elastic while that of US is insignificant and inelastic. The rest of the world has elastic elasticities of substitution mainly due to the low share in Canadian imports of apples. Homotheticity could not be rejected that has important implications for international trade and CGE modeling. However, more evidence on testing of the Armington assumptions in trade flow investigations of fruits and vegetables are required.

Suggested Citation

  • Haq, Zahoor Ul & Ishaq, Muhammad, 2005. "An Armington Assumption Approach To Model International Trade Flow And Market Share For Apples In Canada," Bangladesh Journal of Agricultural Economics, Bangladesh Agricultural University, vol. 28(1-2), pages 1-16, December.
    • Handle: RePEc:ags:bdbjaf:200218
    DOI: 10.22004/ag.econ.200218
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    References listed on IDEAS

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    1. Alston, Julian M & Foster, Kenneth A & Green, Richard D, 1994. "Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 351-356, May.
    2. Ito, Shoichi & Chen, Dean T. & Peterson, E. Wesley F., 1990. "Modeling international trade flows and market shares for agricultural commodities: a modified Armington procedure for rice," Agricultural Economics, Blackwell, vol. 4(3-4), pages 315-333, December.
    3. Hickman, Bert G. & Lau, Lawrence J., 1973. "Elasticities of substitution and export demands in a world trade model," European Economic Review, Elsevier, vol. 4(4), pages 347-380, December.
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