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The Potential for High-Value Agricultural Products Under the North American Free Trade Agreement: The Case of Beef in Mexico and Canada: Comment

Published online by Cambridge University Press:  28 April 2015

Jong-Ying Lee  and
Mark G. Brown
Jong-Ying Lee
Affiliation:
Economic Research Department, Florida Department of Citrus, University of Florida, Gainesville
Mark G. Brown
Affiliation:
Economic Research Department, Florida Department of Citrus, University of Florida, Gainesville
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Extract

In his recent article, Onianwa used the absolute price version of the Rotterdam demand model to estimate Mexican and Canadian import demands for U.S. beef products. The specification of the Rotterdam model allows straightforward testing of the basic theoretical properties of demand. Based on theory, a system of demand equations should obey adding up, homogeneity, symmetry, and negativity (Theil 1971, 1975; Deaton and Muellbauer). Adding up is guaranteed or automatically satisfied in the Rotterdam model and other similar demand models like the almost ideal demand system (AIDS). Hence, adding up cannot be tested. Negativity can be checked by calculating the eigenvalues of the Rotterdam Slutsky matrix (all eigenvalues should be nonpositive). The remaining two properties, homogeneity and symmetry, can be straightforwardly tested by using the likelihood ratio test, as in the present paper, or the Wald or Lagrange multiplier tests; homogeneity can also be tested separately for each demand equation using the F-test.

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Information
Journal of Agricultural and Applied Economics , Volume 28 , Issue 2 , December 1996 , pp. 453 - 454
Copyright
Copyright © Southern Agricultural Economics Association 1996

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References

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