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" Estimating China’s Demand for Cotton Import: "
Zhang, Xueming
Chalfant, James A
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Latin Dissertation
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| Language of Document
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English
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| Record Number
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1105437
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| Doc. No
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TLpq2309942207
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| Main Entry
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Chalfant, James A
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Zhang, Xueming
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| Title & Author
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Estimating China’s Demand for Cotton Import:\ Zhang, XuemingChalfant, James A
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| College
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University of California, Davis
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| Date
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2019
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| student score
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2019
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| Degree
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M.S.
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| Page No
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41
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| Abstract
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China’s cotton industry is important not only for the domestic economy but for the world’s textile industry. China is a significant source of textile products for many countries, and it is the world’s second-largest importer of cotton for the recent four seasons as well as the largest world’s importer of cotton before that. Understanding the patterns of China’s import demand for cotton can benefit domestic industries as well as exporting countries in terms of policy suggestions. This study uses the Almost Ideal Demand System (AIDS) model to estimate import demands from major suppliers in the Chinese cotton market. The model’s suitability for modeling the demand for cotton imports is based on calculated expenditure elasticities and uncompensated price elasticities of import cotton demand, in both static and dynamic versions of the model. The four countries modeled are those that are the most important in the Chinese cotton market, measured by shares of total imports: Australia, India, the U.S., and Uzbekistan. The data cover the period 1993-2017 and are taken from the UN-Comtrade Database. The regression results seem to be unsatisfactory, if evaluated based on the stability of the demand system. The static model seems to generate mostly plausible values for elasticities, and provide potential policy implications. However, various tests of the stability of the demand equations, based on adding dynamic adjustment terms, suggest that the static model is rejected by a more general dynamic model. Unfortunately, common restrictions on the dynamic processes, to correspond to either autocorrelated errors or a partial-adjustment model for import demands tend to be rejected. One clear implication is that a modeler who adopts the common approach of creating a demand system that reflects the restrictions from consumer-demand theory and static optimization, and then judges the model by the plausibility of elasticity estimates may be using a model that would not stand up to tests based on such generalizations. There are a few possible issues that could explain the model’s failure, such as the use of prices that were calculated based on import values, but it may simply be that the demand-system framework does not provide a complete picture of import demands. Other non-economic factors, including some related to strategic behavior on the part of the importing country may need to be considered to provide a fully comprehensive understanding of China’s cotton import demand.
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Agricultural economics
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