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Canadian technology and derived import demand and export supply functions

University of British Columbia

In this thesis we model the structure of Canadian foreign trade and investigate the relationship among imports, exports, and other inputs or outputs. Rather than estimate isolated import and export demand functions, we assume that import and export decisions are made by profit maximizing firms which choose the quantities of their variable inputs and outputs subject to a vector of prices and a vector of fixed inputs. Imports and exports are thus integrated into a model of the Canadian technology together with other domestic inputs and outputs (capital, labour, and indirect taxation on the input side; consumption, investment, changes in inventories, and government purchases on the output side). The model also allows for factor augmenting technological change in a multi-input multi-output framework. Applying duality theory we specify a variable profit function (translog) which is a second order approximation to this technology. The derived import demand and export supply functions are then estimated simultaneously with the equations of the remaining variables. This treatment of imports and exports within a consistent theoretical framework yields not only estimates of the price elasticities of imports and exports, but also determines the possibilities of substitution among imports, exports, and domestic inputs or outputs. Thus we found that exports and investment goods are complements in production and that both are import intensive. We also found that imports are capital intensive and exports labour intensive. Regarding the own price elasticities of both imports and exports, it appeared that they are somewhat higher than it was usually thought. A major part of the thesis is devoted to the construction of imports and exports data. Both are disaggregated into four components and price and quantity indices are calculated for 1948 to 1972. These indices also account for import duties and re-exports.

Text

2010-02-11

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http://hdl.handle.net/2429/20121

Economics

University of British Columbia

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