Estimation of International Demand Behaviour for Use with Input-Output Based Data

Abstract

The making of projections often requires an economy-wide perspective, and the estimation of consumer demands at the international level. In this paper, an implicit, directly additive demand system (AIDADS) is estimated using cross- country data on consumer expenditures from two different sources: the International Comparison Programme (ICP), and the Global Trade Analysis Project (GTAP). The two data sets are found to produce results that are quite consistent despite their differing origins, and the fact that the former is based on consumer goods that embody wholesale/retail margins, while margin demands are treated separately in GTAP. Given the similarity of the results, the estimation based on GTAP data is favoured for economy-wide projection purposes because it can be readily matched to input-output based production and trade data. An additional benefit of the GTAP-based estimates is that they provide direct evidence concerning how aggregate margin expenditures vary with per capita income.