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Title: The trade distance function with an application to modeling import demands
Authors: Wong, Ka Kei Gary (黃嘉基)
Issue Date: Aug-2011
Citation: The Singapore economic review conference 2011, 8 Aug. 2011
Abstract: This paper introduces a new representation of trade preferences termed 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. Its usefulness is illustrated by proposing a new parametric form of a trade distance function and using Japanese time series data. While this form can be easily constrained to be regular, it lacks a closed-form representation in terms of observable variables. This problem however need not hinder estimation; it could be solved by using the numerical inversion estimation method. Results indicate that removal of all import controls in Japan would have a positively small impact on the demand for domestic inputs. More importantly, the modeling and estimation methods are operationally, implying that the trade distance function approach is a promising tool of the empirical analysis of import demands subject to tight theoretical conditions.
Keywords: Trade distance functions
Import demands
Numerical inversion

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Appears in Collections:DECO Conference Papers

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