Modelling import penetration

Kenneth Clements, Long Vo and Marc Jim Mariano

Economic Modelling, 2021, vol. 102, issue C

Abstract: Import penetration has grown substantially in Australia over the past two decades. This study examines import penetration using a consumer demand approach that distinguishes domestically and foreign-produced varieties. The approach avoids restrictive assumptions such as homotheticity and permits an array of hypothesis tests of a functional form. This study uses an innovative procedure to estimate the model with a relative short time series, which is important for countries with limited data. We show how consistent aggregation leads to a macro-level import demand equation that faithfully reflects the underlying micro-demands. Surprisingly, income growth is mainly responsible for the surge in imports and not for their low cost.

Keywords: Import penetration; Disaggregated import demand; Consumer demand; Estimating and simulating demand models (search for similar items in EconPapers)
JEL-codes: C43 D12 F41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001796

DOI: 10.1016/j.econmod.2021.105590

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