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Import Penetration And Consumption Of Domestic And Foreign Varieties

Author

Listed:
  • Kenneth W. Clements

    (Economics Discipline, Business School, University of Western Australia)

  • Long Vo

    (Economics Discipline, Business School, University of Western Australia)

  • Marc Jim Mariano

    (KPMG Economics)

Abstract

This paper analyses import penetration with a consumer demand approach that distinguishes domestically and foreign-produced varieties. Consistent aggregation leads to a macro-level import demand equation that faithfully reflects the underlying micro demands for foreign varieties. The approach avoids restrictive assumptions such as homotheticity and permits an array of hypothesis tests of functional form. We show how to estimate the model with a relative short time series -- important for countries with limited data -- and as an illustrative example, apply it to Australia. We find that income growth is largely responsible for the recent surge in imports into that country.

Suggested Citation

  • Kenneth W. Clements & Long Vo & Marc Jim Mariano, 2020. "Import Penetration And Consumption Of Domestic And Foreign Varieties," Economics Discussion / Working Papers 20-20, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:20-20
    Note: MD5 = 999c1bf15f118c020ac09f563b17943d
    as

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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2020/DP%2020.20_Clements%20Vo%20and%20Mariano.pdf
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    References listed on IDEAS

    as
    1. Meisner, James F., 1979. "The sad fate of the asymptotic Slutsky symmetry test for large systems," Economics Letters, Elsevier, vol. 2(3), pages 231-233.
    2. Laitinen, Kenneth, 1978. "Why is demand homogeneity so often rejected?," Economics Letters, Elsevier, vol. 1(3), pages 187-191.
    3. Kenneth W. Clements, 2019. "Four Laws of Consumption," The Economic Record, The Economic Society of Australia, vol. 95(310), pages 358-385, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Disaggregated import demand; Consumer demand; Estimating demand equations; Bootstrap simulation;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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