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- W2015083513 abstract "Abstract This article introduces a new representation of trade preferences termed as the trade distance function, which measures the maximum amount by which import quantities must be deflated or inflated to reach the indifference surface. The properties of this function are discussed and employed to derive systems of inverse demand for imported goods. We illustrate its usefulness by proposing two new parametric forms of trade distance functions. While the trade distance function directly yields Hicksian inverse demand functions of imports, they usually lack closed-form representations in terms of observable variables. This problem, however, need not hinder estimation and could be solved by using the numerical inversion estimation method. Results generally indicate that the suggested modelling and estimation methods are operationally, implying that the trade distance function approach is a promising tool of the empirical analysis of import demands subjected to tight theoretical conditions. Keywords: trade utility functionstrade distance functionsnumerical inversionJEL Classification:: D22F11 Notes 1 See Cornes (1992, pp. 79–81) for the proof of conditions RD2, RD3, RD6 and RD8, whereas conditions RD4, RD5 and RD7 are proved in Appendix A. 2 The strategy to estimate the Hicksian inverse demand systems is outlined in McLaren et al. (Citation2000) and Wong and McLaren (Citation2005). 3 According to Blackorby et al. (Citation1991) in the context of the direct utility function, domestic input factors (v) and exports (ex) are implicitly weakly separable from imports (m) if and only if the direct trade utility function is implicitly written as which implies that the corresponding trade distance function has the following structure: 4 Nominal values of imports (or exports) for other products are defined as total imports (or exports), net of imports (or exports) of other four components whereas the quantity index of component 5 (m 5 or ex 5) were constructed via the Tornqvist aggregation method. 5 Statistical Bureau of Japan: http://www.stat.go.jp. 6 The superscript ‘n1’ indicates the last row (row and column) of the respective vector (matrix) that has been annihilated. 7 For reasons of brevity, the detailed parameter estimates of the QIAIDS are not reported but are available upon request. 8 Formulae for the quantity and factor intensity elasticities are derived in Appendix B. 9 As shown in Kim (Citation1997, p. 670) in the context of the consumer's distance function, if trade preferences are nonhomothetic then CV is less than EV (in absolute values) for a decrease in the quantity of a particular imported item." @default.
- W2015083513 created "2016-06-24" @default.
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- W2015083513 date "2013-10-01" @default.
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- W2015083513 title "Trade distance functions and the derivation of inverse demand for imports" @default.
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- W2015083513 doi "https://doi.org/10.1080/00036846.2013.767979" @default.
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