This paper estimates sectoral demand functions for Italian imports from European Union countries, Japan, Canada and United States. Evidence of two-way flows and product differentiation is an accepted regularity of international trade. We have tried to include considerations of differentiation in the analysis. Starting from very disaggregated bilateral trade data (5 digit Sitc Rev. 3) we have classified each flow as homogeneous, quality differentiated or non-quality differentiated. Then we have used this classification in the estimate of sectoral import functions. That should increase precision, because avoids pooling homogeneous and differentiated goods in estimation. Our results suggest a very dynamic reaction of Italian imports in many sectors, pointing to possible competitive problems for firms and trade balance constraint for the country.
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Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number
113.
Length: 22 pages Date of creation: Jul 2000 Date of revision:
Jul 2000 Handle: RePEc:cri:cespri:wp113
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Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
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