Separability and the Specification of Foreign Trade Functions

Winters, L. Alan (1984) Separability and the Specification of Foreign Trade Functions. Journal of International Economics, 17 (3-4). pp. 239-263. ISSN 0022-1996

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A universal assumption of models allocating a country's imports among suppliers is that demand is separable over foreign and domestic sources. Nearly as common are the assumptions that import demands are homothetic and mutually separable. This paper explores the theoretical implications of these assumptions and then tests them, applying Deaton and Muellbauer's `Almost Ideal Demand System¿ to U.K. data on manufactures covering 1952¿1979. It uses Lagrange Multiplier tests. Both homogeneity and separability are overwhelmingly rejected. A model of import demand without these restrictions is introduced which, while not entirely satisfactory, suggests a direction for future research.

Item Type: Article
Schools and Departments: University of Sussex Business School > Economics
Depositing User: L.Alan Winters
Date Deposited: 06 Feb 2012 20:08
Last Modified: 03 Jul 2012 10:59
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