Modelling Import Penetration

Kenneth W. Clements, Long Hai Vo, Marc Jim Mariano

Research output: Contribution to journalArticlepeer-review

Abstract

Import penetration has grown substantially in Australia over the past two decades. This study examines import penetration using a consumer demand approach that distinguishes domestically and foreign-produced varieties. The approach avoids restrictive assumptions such as homotheticity and permits an array of hypothesis tests of a functional form. This study uses an innovative procedure to estimate the model with a relative short time series, which is important for countries with limited data. We show how consistent aggregation leads to a macro-level import demand equation that faithfully reflects the underlying micro-demands. Surprisingly, income growth is mainly responsible for the surge in imports and not for their low cost.
Original languageEnglish
Article number105590
JournalEconomic Modelling
Volume102
Early online date29 Jun 2021
DOIs
Publication statusPublished - Sep 2021

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