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Modelling import penetration

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  • Clements, Kenneth W.
  • Vo, Long Hai
  • Mariano, Marc Jim

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.

Suggested Citation

  • Clements, Kenneth W. & Vo, Long Hai & Mariano, Marc Jim, 2021. "Modelling import penetration," Economic Modelling, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001796
    DOI: 10.1016/j.econmod.2021.105590
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    References listed on IDEAS

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    Cited by:

    1. Oleg S. Sukharev, 2023. "Import substitution policy: Breaking the limits," Upravlenets, Ural State University of Economics, vol. 14(1), pages 33-46, March.
    2. Long Hai Vo & Thai‐Ha Le, 2022. "COVID‐19 test‐kit trade and trade policy: Implications for developing countries," The World Economy, Wiley Blackwell, vol. 45(10), pages 3246-3268, October.

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    More about this item

    Keywords

    Import penetration; Disaggregated import demand; Consumer demand; Estimating and simulating demand models;
    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
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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