Short-run and long-run food import elasticities with persistent trading habits

Janne Niemi

No 111, Working Papers from VATT Institute for Economic Research

Abstract: This paper provides estimates and explores the role of own price import demand (Armington) elasticities between different source countries for five agricultural commodities in a framework that incorporates temporal dimension formulated as trading habit persistence. The estimations employ FAO’s bilateral food commodity trade database, complemented with importer and exporter country characteristics from other data. The results support the hypothesis that trade patterns are persistent the adjustment following price changes takes effect with delays. Apart from the evidence for the presence of habit persistence and hence different short and long-term elasticities in general, significant differences between countries are also evidenced, in particular between high- and low-income countries and between main geographic areas. Consistently with the barriers for market entry considerations we also observe higher persistence downwards than upwards.

Keywords: Armington elasticity; Trade; Habit persistence; Agricultural commodities; Business regulation and international economics; E71; F14; O19; Q17; Elinkeinopolitiikka (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-agr and nep-int
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