Bilateral export trade and income similarity: Does the Linder hypothesis hold for agricultural and food trade?
No 206217, 2015 International European Forum (144th EAAE Seminar), February 9-13, 2015, Innsbruck-Igls, Austria from International European Forum on System Dynamics and Innovation in Food Networks
In this paper we invesƟgate the Linder hypothesis for bilateral export trade in agricultural and food products by uƟlizing the sectoral gravity equaƟon derived in Hallak (2010). Based on a sample of 152 countries, we study the relaƟonship for 737 agricultural and food products at the 6-digit HS code level, using trade data for 1995-2012. We esƟmate the gravity equaƟon year by and year and sector by sector, analyzing the esƟmates of Linder's term for two speciﬁcaƟons of the similarity index. We compare a theoreƟcally jusƟﬁed deﬁniƟon of the index with an adjusted deﬁniƟon that takes into account relaƟve prices. We show that similar demand structures determine bilateral export trade. AccounƟng for relaƟve prices, we ﬁnd that the Linder term is more pronounced. Our ﬁnd¬ings show that the similarity eﬀect is strongest for processed products and weakest for bulk products. From those results we come to the conclusion that similar aggregate preferences are a major driver of export trade in ﬁnal consumpƟon goods.
Keywords: Agribusiness (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iefi15:206217
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