The The Role of Income in Trading-Differentiated Agri-Food Products: The Case of Canada, the United States, and Selected EU Countries
2009
Haq, Zahoor | Meilke, Karl
This study investigates the role of income in determining the agri-food exports of a subset of EU countries, Canada, and the United States by estimating per capita bilateral trade flows for 42 individual products categorized into nine product sectors across 52 countries for the period 1990-2000. About 43% of the total observations of bilateral trade flows for the selected regions and products are zero. Therefore, the fixed-effects Heckman Maximum Likelihood estimation procedure is used to account for the zero observations. The results show that, in general, the three regions (Canada, the EU countries, United States) face statistically significant and positive income elasticities from developing countries. However, only Canadian and United States' exports of agri-food products benefit from elastic income elasticities. Middle-income developing countries are the growth market of the future as growth in their expenditures on agri-food imports outpaces the growth in their per capita incomes. Homotheticity is consistently rejected for Canada and the EU and less often for the United States. Thus, income plays an important role in agri-food trade; however, further investigation is needed to better understand the forces that generate rather widely divergent results across countries and products.
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