Accounting for supply, integration and income in foreign trade

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Abstract

This paper provides alternative estimates of export and import demand functions. It is suggested that previous estimates of export and import functions may be biased since they ignore factors such as the integration of markets through customs unions and supply effects. The results in this paper reveal that when these factors are incorporated into the model, the estimated income elasticities of exports and imports decline substantially and trade flows are found to be more responsive to unanticipated variations in income. The analysis further reveals that the degree of integration in markets is closely linked to the level of economic growth.

Original languageEnglish
Pages (from-to)53-63
Number of pages11
JournalApplied Economics
Volume26
Issue number1
DOIs
Publication statusPublished - 1 Jan 1994

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