The Income Elasticity of Import Demand: Micro Evidence and An Application / David Hummels, Kwan Yong Lee.

Format:

Book

Author/Creator:

Hummels, David.

Contributor:

National Bureau of Economic Research.

Lee, Kwan Yong.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23338.

NBER working paper series no. w23338

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Income Elasticity of Import Demand

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We construct a synthetic panel of household expenditures from the Consumer Expenditure Survey (CEX) and use the Quadratic Almost Ideal Demand System to estimate expenditure shares and income elasticities of demand that vary by good-income-time. We show that the size and distribution of income shocks drives expenditure change in a manner that varies profoundly across traded goods. Our estimates of expenditure shares and income elasticities could be useful in many applications that seek to explain changes in trade behavior from the demand side, and indicate the strong sensitivity of trade to changes in the tails of the income distribution. We explore an application involving the Great Trade Collapse. Income-induced expenditure changes are positively correlated with the cross-good pattern of import changes, generating a predicted change 40% as large as the raw variation in import declines.

Notes:

Print version record

April 2017.