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Estimates of the Elasticity of Substitution Between Imported and Domestically Produced Commodities at the Four Digit ASIC Level

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  • Chris M. Alaouze
  • John S. Marsden
  • John Zeitsch
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    Abstract

    This paper contains estimates made in 1977 of the elasticity of substitution between domestically produced and imported commodities at the four digit level of the Australian ASIC commodity classification then in use. The data upon which the estimates were based included series specially constructed for the Industries Assistance Commission from customs clearance records covering the period 1968-69 through 1974-75. Because this period contained a substantial movement in the real exchange rate for the Australian dollar, relatively large movements occur in the relative prices in Australia of the domestically produced and the competing imported commodities. Thus the sample period and data augured well for the estimation of Armington substitution elasticities, which was relatively successful. Note, however, that the data were not rich enough to obtain separate estimates for different sources of imports, nor for different intermediate and final uses of the commodities. The estimates served well, however, in the implementation of the ORANI model used in debate and policy formation in Australia during the 1980s. The four-digit ASIC data base used in this study was published in 1985 as Chris M. Alaouze (1985), "The Impact Trade Flow Data Base", Impact Project Working Paper No. I-24, Melbourne. This paper will be available on this web site in the reasonably near future. This data base also includes pressure of demand series for eight industry groups. These were included as regressors and found significant in the equations used to estimate the Armington elasticities for several commodities. (This abstract written in 2004 by Chris Alaouze and Alan Powell)

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    File URL: http://www.copsmodels.com/ftp/workpapr/o-11.pdf
    File Function: Initial version, 1977-07
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    Bibliographic Info

    Paper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number o-11.

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    Date of creation: Jul 1977
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    Handle: RePEc:cop:wpaper:o-11

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    References

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    1. Powell, Alan A. & Gruen, Fred H.G., 1967. "The Estimation Of Production Frontiers: The Australian Livestock/Cereals Complex," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 11(01), June.
    2. Gregory, R G, 1971. "United States Imports and Internal Pressure of Demand: 1948-68," American Economic Review, American Economic Association, vol. 61(1), pages 28-47, March.
    3. Wallis, Kenneth F, 1972. "Testing for Fourth Order Autocorrelation in Qtrly Regression Equations," Econometrica, Econometric Society, vol. 40(4), pages 617-36, July.
    4. Chris M. Alaouze, 1976. "Estimation of the elasticity of substitution between imported and domestically produced intermediate inputs," Centre of Policy Studies/IMPACT Centre Working Papers op-07, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    Cited by:
    1. Thomas Hertel & David Hummels & Maros Ivanic & Roman Keeney, 2004. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," NBER Working Papers 10477, National Bureau of Economic Research, Inc.
    2. Hillberry, Russell & Hummels, David, 2013. "Trade Elasticity Parameters for a Computable General Equilibrium Model," Handbook of Computable General Equilibrium Modeling, Elsevier.
    3. Marcin Pracz & Rod Tyers, 2006. "Strategic Interaction amongst Australia’s East Coast Ports," ANU Working Papers in Economics and Econometrics 2006-471, Australian National University, College of Business and Economics, School of Economics.
    4. Cassoni, Adriana & Flores, Manuel, 2008. "Methodological shortcomings in estimating Armington elasticities," MPRA Paper 34544, University Library of Munich, Germany, revised 2009.
    5. Dixon, Peter B. & Koopman, Robert B. & Rimmer, Maureen T., 2013. "The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis," Handbook of Computable General Equilibrium Modeling, Elsevier.
    6. Alan A. Powell, 1997. "How Does the Share of Imports Change During Structural Adjustment?," Centre of Policy Studies/IMPACT Centre Working Papers op-86, Victoria University, Centre of Policy Studies/IMPACT Centre.

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