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Macroeconomic Import Functions with Imperfect Competition. An Application to the EC Trade

Author

Listed:
  • Oliveira-Martins, Joaquim
  • Toujas-Bernate, Joel

Abstract

This paper analyses the consequences for the standard import allocation models of assuming monopolistic competition on the supply side. Together with relative prices, this requires additional variables to capture product differentiation effects. To this end, we derive a composite price index from a nested CES-translog demand system. Our empirical work is twofold: first, we try to assess the long-term relationship between market shares and relative prices by using a cointegration technique, and second, we estimate the demand system for domestic, European and foreign products in the main European markets. The results show that a composite price index, integrating product differentiation, tends to perform better than pure price effects alone in a significant number of cases. We use the estimation results to assess the impact of a potential homogenization of tastes over European markets, after the `1992' integration process.

Suggested Citation

  • Oliveira-Martins, Joaquim & Toujas-Bernate, Joel, 1992. "Macroeconomic Import Functions with Imperfect Competition. An Application to the EC Trade," CEPR Discussion Papers 707, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:707
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    Cited by:

    1. Antoine Magnier & Joël Toujas-Bernate, 1994. "Technology and trade: Empirical evidences for the major five industrialized countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(3), pages 494-520, September.

    More about this item

    Keywords

    EC Trade; Import Equations; Market Integration; Product Differentiation; Translog-CES Demand System;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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