NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Export Supply and Import Demand Functions: A Production Theory Approach

W. Erwin Diewert

NBER Working Paper No. 2011
Issued in August 1986
NBER Program(s):International Trade and Investment, Productivity, Innovation, and Entrepreneurship, International Finance and Macroeconomics

In this paper we theoretically and empirically model import demand and export supply behavior of firms for the U.S. economy from 1967-1982. A producer theoretic approach based on duality theory is used to derive econometric systems of producer supply and demand functions that are consistent with profit maximizing behavior. This system is then empirically implemented and the resulting estimates used to construct a full set of supply and demand elasticities characterizing import demand and export supply functions as well as domestic output supply and labor demand. These elasticities are in turn used to derive devaluation elasticities and some estimates of the equilibrium real exchange rate that would cause the U.S. trade surplus to reach zero.

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Document Object Identifier (DOI): 10.3386/w2011

Published: Feenstra, Robert C. (ed.) Empirical methods for international trade. Cambridge, MA and London: MIT Press, 1988.

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