IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/30757.html
   My bibliography  Save this article

Two-Stage Utility Maximization And Import Demand Systems Revisited: Limitations And An Alternative

Author

Listed:
  • Davis, George C.
  • Jensen, Kimberly L.

Abstract

Two-stage utility maximization theory has been widely used in the literature to estimate import demand for agricultural commodities that are often inputs. This article examines the overlooked conceptual and empirical limitations of applying two-stage utility maximization theory to model the demand for imported commodities that are inputs. A discussion is presented about how the underutilized theory of two-stage profit maximization overcomes these limitations. Also discussed are the conditions under which errors illustration of the two-stage profit maximization procedure is provided.

Suggested Citation

  • Davis, George C. & Jensen, Kimberly L., 1994. "Two-Stage Utility Maximization And Import Demand Systems Revisited: Limitations And An Alternative," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-16, December.
    • Handle: RePEc:ags:jlaare:30757
    DOI: 10.22004/ag.econ.30757
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/30757/files/19020409.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.30757?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Biing-Hwan Lin & Larry D. Makus, 1991. "Japanese Barley Imports: Implications of the 1988 Japanese Beef Market Access Agreement," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(3), pages 423-437, November.
    2. Lopez, Ramon E, 1985. "Structural Implications of a Class of Flexible Functional Forms for Profit Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 593-601, October.
    3. Livernois, John R & Ryan, David L, 1989. "Testing for Non-jointness in Oil and Gas Exploration: A Variable Profit Function Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 479-504, May.
    4. Bliss, C. J., 1975. "Capital Theory and the Distribution of Income," Elsevier Monographs, Elsevier, edition 1, number 9780720436044 edited by Bliss, C. J..
    5. George C. Davis & Nancy C. Kruse, 1993. "Consistent Estimation of Armington Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 719-723.
    6. Julian M. Alston & Colin A. Carter & Richard Green & Daniel Pick, 1990. "Whither Armington Trade Models?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 455-467.
    7. Harry de Gorter & Karl D. Meilke, 1987. "The EEC's Wheat Price Policies and International Trade in Differentiated Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 223-229.
    8. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-289, August.
    9. Heien, Dale & Pick, Daniel H., 1991. "The Structure Of International Demand For Soybean Products," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 23(1), pages 1-7, July.
    10. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, January.
    11. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, vol. 5(1), pages 89-116, January.
    12. LaFrance, Jeffrey T., 1991. "When Is Expenditure "Exogenous" In Separable Demand Models?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(1), pages 1-14, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad, Andrew & Ngeleza, Guyslain K., 2009. "European Union preferential trade agreements with developing countries and their impact on Colombian and Kenyan carnation exports to the United Kingdom:," IFPRI discussion papers 862, International Food Policy Research Institute (IFPRI).
    2. Andrew Muhammad & Richard L. Kilmer, 2008. "The impact of EU export subsidy reductions on U.S. dairy exports," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 557-574.
    3. Sun, Changyou, 2015. "An investigation of China's import demand for wood pulp and wastepaper," Forest Policy and Economics, Elsevier, vol. 61(C), pages 113-121.
    4. Hill, Harvey S.J. & Stiegert, Kyle W. & Love, H. Alan, 1997. "Testing the Validity of Standard Representative Agent Import Demand Systems," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35823, Western Agricultural Economics Association.
    5. Richards, Timothy J. & Patterson, Paul M., 1998. "Dynamic Complementarity In Export Promotion: The Market Access Program In Fruits And Vegetables," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-19, December.
    6. Muhammad, Andrew, 2008. "The Role of the Imports for Re-Exports Program in Determining Canadian Demand for Imported Cheese: Implications for U.S. Exports," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 8214, Southern Agricultural Economics Association.
    7. Jason H. Grant & Dayton M. Lambert & Kenneth A. Foster, 2010. "A Seasonal Inverse Almost Ideal Demand System for North American Fresh Tomatoes," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 58(2), pages 215-234, June.
    8. Njonou, Rabelais Yankam & Frahan, Bruno Henry de & Surry, Yves R., 2002. "Testing Separability for Common Wheat Qualities in French Import Demand Market Using Aids and Rotterdam Demand Models," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24921, European Association of Agricultural Economists.
    9. Mutondo, Joao E. & Henneberry, Shida Rastegari, 2007. "A Source-Differentiated Analysis of U.S. Meat Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(3), pages 1-19, December.
    10. Muhammad, Andrew & Jones, Keithly G. & Hahn, William F., 2007. "The Impact of Domestic and Import Prices on U.S. Lamb Imports: A Production System Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 36(2), pages 1-11, October.
    11. Richards, Timothy J. & Van Ispelen, Pieter & Kagan, A. & Thor, Eric P., 1996. "A Two-Stage Analysis of the Effectiveness of Promotion Programs for U.S. Apples," Agricultural Commodity Promotion Policies and Programs in the Global Agri-Food System, May 26-27, 1996, Cancun, Mexico 279648, Regional Research Projects > NECC-63: Research Committee on Commodity Promotion.
    12. Chen, Wei & Marchant, Mary A. & Muhammad, Andrew, 2010. "China’s Soybean Imports — Price Impacts using a Production System Approach," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56528, Southern Agricultural Economics Association.
    13. Dengjun Zhang, 2015. "The trade effect of price risk: a system-wide approach," Empirical Economics, Springer, vol. 48(3), pages 1149-1167, May.
    14. Washington, Andrew A. & Kilmer, Richard L., 2002. "The Derived Demand For Imported Cheese Into Japan: A Two-Stage Differential Production Approach," 2002 Annual meeting, July 28-31, Long Beach, CA 19769, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Frahan, Bruno Henry de & Tritten, Christian, 2002. "Differentiated Demand and Supply of Wheat under Alternative European Trade Policies," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24831, European Association of Agricultural Economists.
    16. Wang, Xiaojin & Reed, Michael, 2014. "Estimation of U.S. Demand for Imported Shrimp by Country: A Two-stage Differential Production Approach," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162459, Southern Agricultural Economics Association.
    17. Muhammad, Andrew & Jones, Keithly G. & Hahn, William F., 2004. "U.S. Demand For Imported Lamb By Country: A Two-Stage Differential Production Approach," 2004 Annual Meeting, February 14-18, 2004, Tulsa, Oklahoma 34690, Southern Agricultural Economics Association.
    18. Buhr, Brian L. & Kim, Hanho, 1997. "Dynamic adjustment in the US beef market with imports," Agricultural Economics, Blackwell, vol. 17(1), pages 21-34, October.
    19. Jones, Keithly G. & Hahn, William F. & Davis, Christopher G., 2003. "Demand for U.S. Lamb and Mutton: A Two Stage Differential Approach," 2003 Annual meeting, July 27-30, Montreal, Canada 22122, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Chen, Ping-Yu & Chen, Bo-Yu & Tsai, Pei-Hui & Chen, Chi-Chung, 2015. "Evaluating the impacts of a carbon tax on imported forest products—evidence from Taiwan," Forest Policy and Economics, Elsevier, vol. 50(C), pages 45-52.
    21. Andrew Muhammad, 2009. "Would African Countries Benefit from the Termination of Kenya’s Economic Partnership Agreement (EPA) with the EU? An Analysis of EU Demand for Imported Roses," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 220-238, February.
    22. Koo, Won W. & Mao, Weining & Sakurai, Takeshi, 2000. "Wheat demand in Japanese flour milling industry: a production theory approach," Agricultural Economics, Blackwell, vol. 24(2), pages 167-178, January.
    23. Chen, Bowen & Villoria, Nelson & Xia, Tian, 2017. "Import Protections in China’s Grain Markets: An Empirical Assessment," 2017: Globalization Adrift, December 3-5, 2017, Washington, D.C. 266817, International Agricultural Trade Research Consortium.
    24. Sun, Changyou, 2014. "Recent growth in China's roundwood import and its global implications," Forest Policy and Economics, Elsevier, vol. 39(C), pages 43-53.
    25. Bowen Chen & Nelson B. Villoria & Tian Xia, 2020. "Tariff quota administration in China's grain markets: An empirical assessment," Agricultural Economics, International Association of Agricultural Economists, vol. 51(2), pages 191-206, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanrahan, Kevin F. & Westhoff, Patrick C. & Young, Robert E., II, 2001. "Trade Allocation Modeling: Comparing The Results From Armington And Locally Regular Ai Demand System Specifications Of A Uk Beef Import Demand Allocation Model," 2001 Annual meeting, August 5-8, Chicago, IL 20510, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Satyanarayana, Vidyashankara & Wilson, William W. & Johnson, D. Demcey, 1997. "Import Demand For Malt: A Times Series And Econometric Analysis," Agricultural Economics Reports 23343, North Dakota State University, Department of Agribusiness and Applied Economics.
    3. H. Ahammad & N. Islam, 1999. "Estimating the WA Agricultural Production System: A profit function approach," Economics Discussion / Working Papers 99-11, The University of Western Australia, Department of Economics.
    4. Jaouad, Mohamed, 1994. "An agricultural policy and trade model for Morocco," ISU General Staff Papers 1994010108000011483, Iowa State University, Department of Economics.
    5. Aradhyula, Satheesh Venkata, 1989. "Policy structure, output supply and input demand for US crops," ISU General Staff Papers 198901010800009909, Iowa State University, Department of Economics.
    6. Rosario Crinò, 2010. "Service Offshoring and White-Collar Employment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(2), pages 595-632.
    7. Marilyne Huchet‐Bourdon & Esmaeil Pishbahar, 2009. "Armington Elasticities and Tariff Regime: An Application to European Union Rice Imports," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 586-603, September.
    8. Pan, Shihua, 1990. "The microfoundations of mixed system of planning and markets: some theoretical considerations and an empirical analysis of the Chinese agriculture," ISU General Staff Papers 1990010108000010876, Iowa State University, Department of Economics.
    9. Sckokai, Paolo, 2001. "The Common Agricultural Policy In Econometric Models," Working Papers 14800, National Institute of Agricultural Economics, Italy - INEA, Osservatorio Sulle Politiche Agricole dell'UE.
    10. J. M. Gil & B. Dhehibi & M. Ben Kaabia & A. M. Angulo, 2004. "Non-stationarity and the import demand for virgin olive oil in the European Union," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1859-1869.
    11. David I. Stern, 2012. "Interfuel Substitution: A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 307-331, April.
    12. Brännlund, Runar & Lundgren, Tommy, 2005. "Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System," Umeå Economic Studies 668, Umeå University, Department of Economics.
    13. Herve Guyomard & Chantal Le Mouël & U. Vasavada, 1993. "Applying duality theory in agricultural production economics as a basis of policy decision making [[Application de la théorie de la dualité en économie de la production agricole : utilisation pour ," Post-Print hal-02850915, HAL.
    14. Keith R. McLaren & Xueyan Zhao, 2009. "The Econometric Specification of Input Demand Systems Implied by Cost Function Representations," Monash Econometrics and Business Statistics Working Papers 3/09, Monash University, Department of Econometrics and Business Statistics.
    15. Brannlund, Runar & Lundgren, Tommy, 2007. "Swedish industry and Kyoto--An assessment of the effects of the European CO2 emission trading system," Energy Policy, Elsevier, vol. 35(9), pages 4749-4762, September.
    16. Poison, Rudolph A. & Shumway, C. Richard, 1990. "Structure of South Central Agricultural Production," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 22(2), pages 153-163, December.
    17. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 143-186, National Bureau of Economic Research, Inc.
    18. Lee, Young-Jae & Kennedy, P. Lynn & Hilbun, Brian M., 2008. "Import Demand System Analysis Of The South Korean Wine Market With The Source Differentated Aids Model," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6345, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Yang, Seung-Ryong & Koo, Won W., 1994. "Japanese Meat Import Demand Estimation With The Source Differentiated Aids Model," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-13, December.
    20. Dong Hee Suh & Charles B. Moss, 2017. "Dynamic adjustment of ethanol demand to crude oil prices: implications for mandated ethanol usage," Empirical Economics, Springer, vol. 52(4), pages 1587-1607, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:30757. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.