Separability and the modelling of international economic integration
Most models of the allocation of imports over suppliers adopt a two-stage (separable) procedure in which a total imports function is estimated prior to the function allocating imports over suppliers. This procedure is tested for five countries' imports of manufactures and found wanting in four of them. A more general model is proposed and estimated. It is used to estimate the effects of U.K. accession to the EEC on her exports to these countries. Exports to the EEC countries rose, but those elsewhere fell. Overall, accession is shown to have worsened the U.K.'s trade balance and gross output of manufactures.
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