An econometric study on estimation of trade shares using the almost ideal demand system in the world link

Analyses the import shares by country using the world trade matrix data for 25 countries/regions of the world. Various methods for the analysis of import or export shares are used in the literature but none of the studies has made use of the approach of an Almost Ideal Demand System (AIDS). The results based on AIDS for import shares are plausible and when maximizing behaviour is not assumed, estimation of import share equations by ordinary least squares is possible. In the AIDS approach, import shares turn out to be a function of real value of imports and export prices of major competitors. Homogeneity and symmetry restrictions can be tested and estimated with constraints can be conducted using FIML (Full Information Maximum Likelihood) or equivalent methods. The paper presents results for three important countries/regions, namely the USA, Japan and the EEC as importing country/regions, and for major suppliers to each country/region. -from Author