IMPORT PENETRATION AND CONSUMPTION OF DOMESTIC AND FOREIGN VARIETIES

Kenneth Clements, Long Vo and Marc Jim Mariano
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Marc Jim Mariano: KPMG Economics

No 20-20, Economics Discussion / Working Papers from The University of Western Australia, Department of 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.

Keywords: Disaggregated import demand; Consumer demand; Estimating demand equations; Bootstrap simulation (search for similar items in EconPapers)
JEL-codes: D12 F41 (search for similar items in EconPapers)
Pages: 78
Date: 2020
New Economics Papers: this item is included in nep-int and nep-isf
Note: MD5 = 999c1bf15f118c020ac09f563b17943d
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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:20-20

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