nep-int New Economics Papers
on International Trade
Issue of 2006‒04‒22
23 papers chosen by
Martin Berka
Massey University

  1. Increasing Returns, Imperfect Competition and Factor Prices By Paolo Epifani; Gino Gancia
  2. Effects of Exchange Rate Volatility on the Volume and Volatility of Bilateral Exports By Christopher F. Baum; Mustafa Caglayan
  3. Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation By Xenia Matschke
  4. Is Gravity Linear? By Millimet, Daniel; Henderson, Daniel
  5. Integration and Trade Specialization in East Asia By Yose Rizal Damuri; Raymond Atje; Arya B. Gaduh
  6. The Impact of Federation on Australia%u2019s Trade Flows By Douglas A. Irwin
  7. Road and Maritime Transport Costs: A Comparative Analysis of Spanish Exports to Poland and Turkey By Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmann D.
  8. Have Developing Countries Gained From the Marriage Between Trade Agreements and Intellectual Property Rights? By Sumner J La Croix; Denise Eby Konan
  9. Industrial and trade dynamics in the Baltic Sea region - the last two waves of European Union enlargement from a historic perspective By Marek Tiits
  10. Multilateral Trade and Agricultural Policy Reforms in Sugar Markets By Amani Elobeid; John C. Beghin
  11. The Making of Asia's First Bilateral FTA - Origins and Regional Implications of the Japan-Singapore Economic Partnership Agreement By Takashi Terada
  12. China’s Emergence and the Reorganisation of Trade Flows in Asia By Guillaume Gaulier; Francoise Lemoine; Deniz Unal-Kesenci
  14. Evaluating the Trade and Welfare Effects of Developing RTAs By Souleymane COULIBALY
  15. World Trade Competitiveness: A Disaggregated View by Shift-Share Analysis By Angela Cheptea; Guillaume Gaulier; Soledad Zignago
  16. Free Trade with Hazardous Products? The Emergence of Transnational Governance with Eroding State Government By Christian Joerges
  17. Tariff Escalation and Invasive Species Risk By Anh Tu; John C. Beghin; Estelle Gozlan
  18. Rags in the High Rent District: the Evolution of Quota Rents in Textiles and Clothing By Joseph Francois; Julia Woerz
  19. Changing Structure of Pork Trade, Production, and Processing in Mexico, The By S. Patricia Batres-Marquez; Roxanne Clemens; Helen H. Jensen
  20. Liberalisation of Trade in Renewable Energy and Associated Technologies: Biodiesel, Solar Thermal and Geothermal Energy By Ronald Steenblik
  21. Antebellum Tariff Politics: Coalition Formation and Shifting Regional Interests By Douglas A. Irwin
  22. U.S. Proposal for WTO Agriculture Negotiations: Its Impact on U.S. and World Agriculture By FAPRI Staff
  23. Growing Demand for Animal-Protein-Source Products in Indonesia: Trade Implications By Jacinto F. Fabiosa

  1. By: Paolo Epifani; Gino Gancia
    Abstract: We show how, in general equilibrium models featuring increasing returns, imperfect competition and endogenous markups, changes in the scale of economic activity affect income distribution across factors. Whenever final goods are gross-substitutes (gross- complements), a scale expansion raises (lowers) the relative reward of the scarce factor or the factor used intensively in the sector characterized by a higher degree of product differentiation and higher fixed costs. Under very reasonable hypothesis, our theory suggests that scale is skill-biased. This result provides a microfoundation for the secular increase in the relative demand for skilled labor. Moreover, it constitutes an important link among major explanations for the rise in wage inequality: skill-biased technical change, capital-skill complementarities and international trade. We provide new evidence on the mechanism underlying the skill bias of scale.
    Keywords: Endogenous Markups, Pro-competitive E¤ect, Income Distribution, Trade Models with Imperfect Competition, Wage Inequality
    JEL: F12 F16
    Date: 2004–07
  2. By: Christopher F. Baum (Boston College); Mustafa Caglayan (University of Glasgow)
    Abstract: We present an empirical investigation of a recently suggested but untested proposition that exchange rate volatility can have an impact on both the volume and variability of trade flows, considering a broad set of countries' bilateral real trade flows over the period 1980-1998. We generate proxies for the volatility of real trade flows and real exchange rates after carefully scrutinizing these variables' time series properties. Similar to the findings of earlier theoretical and empirical research, our first set of results show that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provide new and novel findings that exchange rate volatility has a consistent positive and significant effect on the volatility of bilateral trade flows.
    Keywords: exchange rates, volatility, fractional integration, trade flows
    JEL: F17 F31 C22
    Date: 2006–04–16
  3. By: Xenia Matschke (University of Connecticut)
    Abstract: Labor market imperfections are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities that are prevalent in continental European countries into the well-known protection for sale model proposed by Grossman and Helpman (1994). I show that contrary to commonly held views, imperfections in the labor market do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets.
    Keywords: Tariffs, trade protection, protection for sale, labor market.
    JEL: F13 F16
    Date: 2006–04
  4. By: Millimet, Daniel (SMU); Henderson, Daniel (SUNY-Binghamton)
    Abstract: Despite the solid theoretical foundation on which the gravity model of bilateral trade is based, empirical implementation requires several assumptions which do not follow directly from the underlying theory. First, unobserved trade costs are assumed to be a (log-) linear function of observables. Second, the ad-valorem tax equivalents of trade costs are predominantly assumed to be constant across space, and to a lesser extent time. Maintaining consistency with the underlying theory, but relaxing these assumptions, we estimate gravity models ?in levels and logs ?using two data sets via nonparametric methods. The results are striking. Despite the added flexibility of the nonparametric models, parametric models based on these assumptions offer equally or more reliable in-sample forecasts (sometimes) and out-of-sample forecasts (always), particularly in the levels model. Moreover, formal statistical tests fail to reject the theoretically consistent parametric functional form. Thus, concerns in the gravity literature over functional form appear unwarranted, and estimation of the gravity model in levels is recommended.
    Keywords: Gravity Model, Bilateral Trade, Border Effect, Currency Union, Generalized Kernel Estimation
    JEL: C14 C33 F14
    Date: 2006–04–05
  5. By: Yose Rizal Damuri (Department of Economics, CSIS Jakarta, Indonesia); Raymond Atje (Department of Economics, CSIS Jakarta, Indonesia); Arya B. Gaduh (Department of Economics, CSIS Jakarta, Indonesia)
    Abstract: The 1990s saw East Asia becoming more integrated as trade barriers fell, trade intensity and intra-industry trade increased, and production networks formed. This greater integration has resulted in changing patterns of trade specialization in the region, as different economies adjust. Some economies (especially resource-rich economies) maintain their top trade-specialty products, while others move towards higher-productivity manufacturing goods. Nonetheless, we observe in all East Asian countries in our study a trend towards specializing in products with higher sophistication and technological intensity. Meanwhile, our examination of the product specialization mobility and our empirical analysis suggest no indication of East Asian countries being in a "low-productivity specialization trap" which would disable them from shifting their specialization towards higher-productivity and higher-value goods.
    Keywords: trade specialization, regional integration, East Asia, trade barriers
    JEL: F13 F15 F17
    Date: 2006–03
  6. By: Douglas A. Irwin
    Abstract: In 1901, six Australian states joined together in political and economic union, creating an internal free trade area and adopting a common external tariff. This paper investigates the impact of federation on Australia's internal and international trade flows by studying changes in the "border effect" over this time. This is possible because Australian states reported intra-Australian trade prior to 1901 and for eight years after federation. The results indicate that federation itself produced little change in Australia's trade patterns, but that the border effect increased substantially between 1906 and 1909 when the protectionist Lyne Tariff was imposed.
    JEL: F1 N7
    Date: 2006–04
  7. By: Inmaculada Martínez-Zarzoso (Ibero-Amerika Institut der Universität Göttingen); Felicitas Nowak-Lehmann D. (Ibero-Amerika Institut der Universität Göttingen)
    Abstract: In this paper, we analyze the determinants of maritime and road transport costs for Spanish exports to Poland and Turkey and investigate the different effects of these costs on international trade. First, we investigate the extent to which maritime and road transport costs depend on different factors such as unit values, distances, transport conditions, service structures, and service quality. Second, we analyze the relative importance of road and maritime transport costs as determinants of trade flows. The data on transport costs are drawn from a new database compiled from primary data sources. The main results of this investigation identify the central variables influencing road and maritime transportation costs: for both modes, transport conditions are strong determinants, whereas efficiency and service quality are more important for maritime transport costs, and geographical distance is more important for road transport. Road and maritime transport costs are important explanatory factors of exports and they seem to deter trade to a greater extent than road or maritime transit time when considered endogenously determined.
    Keywords: Transport costs, transport mode, Spanish exports, international trade
    JEL: F1 O1 O55
    Date: 2006–03–15
  8. By: Sumner J La Croix (Department of Economics, University of Hawaii at Manoa); Denise Eby Konan (Department of Economics, University of Hawaii at Manoa; Chancellor's Office, University of Hawaii at Manoa)
    Abstract: Have developing countries gained from the incorporation of IPR standards into the WTO framework? We use historical, theoretical, and empirical methods to answer this question and reach several conclusions. First, U.S. history provides a clear case of a developing country which used strong patent rights and weak copyrights in the 19th century to enhance its growth prospects. Second, recent theoretical literature presents a strong case for welfare gains to developing countries from patent harmonization if developed countries pay lump-sums to offset higher royalty payments by developing countries. Third, the creation of intellectual property in new types of inventions is necessary, but the scope, depth, and enforcement of IPRs is likely to differ across countries according to their economic and political institutions, their per capita income, and their capability to engage in and disseminate the fruits of R&D.
    JEL: K33 F13 O34
    Date: 2006
  9. By: Marek Tiits (Institute of Baltic Studies)
    Abstract: The aim of this paper is to review the dynamics of economic development in the Baltic Sea region surrounding the last two waves of European Union enlargement, assessing the quality of economic change and prospects for future development. We observe the emergence of a closely integrated economic system in the Baltic Sea region, and notice that the Nordic countries and Germany specialise in "good trade" while the Baltic States and Poland have been increasingly specialising in "bad trade", not conductive for a sustained longer-term increase of living standards.
    Keywords: Baltic Sea region, industrial and trade dynamics, integration
    JEL: F14 F15 F4 O32 O52
    Date: 2006–03–11
  10. By: Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: We analyze the impact of trade liberalization, removal of production subsidies, and elimination of consumption distortions in world sugar markets using a partial-equilibrium international sugar model calibrated on 2002 market data and current policies. The removal of trade distortions alone induces a 27% price increase while the removal of all trade and production distortions induces a 48% increase by 2011/12 relative to the baseline. Aggregate trade expands moderately, but location of production and trade patterns change substantially. Protectionist OECD countries (the EU, Japan, the US) experience an import expansion or export reduction and significant contraction in production in unfettered markets. Competitive producers in both OECD countries (Australia) and non-OECD countries (Brazil, Cuba), and even some protected producers (Indonesia, Turkey), expand production when all distortions are removed. Consumption distortions have marginal impacts on world markets and location of production. We discuss the significance of these results in the context of mounting pressures to increase market access in highly protected OECD countries and the impact on non-OECD countries.
    Keywords: agricultural policy, Doha, domestic subsidies, sugar, trade liberalization, WTO.
    JEL: Q18 F10
    Date: 2005–09
  11. By: Takashi Terada (National University of Singapore)
    Abstract: This paper aims to examine how and why Japan and Singapore decided to pursue FTAs, what interests both perceived in their pursuit of FTAs, what elements contributed to both countries being linked in this trade policy arrangement, and what implications the JSEPA has had for the FTA movement in East Asia. It argues that the JSEPA was made possible mainly through Singapore’s initial offer to exclude agricultural products from tariff elimination. But Japan faced problems in seeking FTAs with other ASEAN countries which were less developed than Singapore and had a higher proportion of agricultural exports, as the exclusion of specific agricultural products, such as rice and sugar, would contradict Japan’s claim that its FTAs would bolster the WTO-based multilateral system. The proliferation of FTAs in East Asia may generate a ‘spaghetti-bowl’ effect with varying rules of origin that may divert and distort trade, but the ‘new age’ aspects of the Japan-Singapore agreement will also have some positive economic effects. Although the preferential trade elements of the agreement are detrimental, the smaller portion of tariff elimination results in a smaller trade diversion effect on trading partners. Therefore, the Japan-Singapore agreement carries symbolic meaning in terms of trade policy debates as well as signifying a paradigm shift in Japan’s international trade policy.
    Keywords: Japan, Singapore, international trade, FTA, East Asia, JSEPA, tariff elimination, preferencial trade agreement
    JEL: F16 F42 O24
    Date: 2006–03
  12. By: Guillaume Gaulier; Francoise Lemoine; Deniz Unal-Kesenci
    Abstract: The emergence of China has intensified the international segmentation of production processes within Asia, but has not created an autonomous engine for the region’s trade, as Asia still depends on outside markets for its final goods exports. The reorganisation of production has weakened the position of the advanced economies (Japan and the US) in Asia’s trade, but up to now has not severely affected the position of the emerging Asian economies (Malaysia, Philippines, Thailand). However, the surge of China’s exports and the decline of its export prices, suggest the risk of a downward spiral of cost-competition, while the deterioration of China’s terms of trade raises the question of the sustainability of its recent growth strategy.
    Keywords: China; Asia; trade; regional integration; specialisation
    JEL: F14 F15 F2
    Date: 2006–03
  13. By: Vandenbussche,Hylke; Zanardi,Maurizio (Tilburg University, Center for Economic Research)
    Abstract: Advocates of antidumping (AD) laws downplay their effects by arguing that the trade flows that are subject to AD are small and their distortions negligible. This paper is the first to counter that notion by quantifying the worldwide effect of AD laws on aggregate trade flows. The recent proliferation of AD laws across countries provides us with a natural experiment to estimate the trade effects of adopting versus using AD laws; differences in the intensity of use among countries with older AD laws allow us to investigate reputation effects. For this purpose, we estimate worldwide trade flows using a gravity equation spanning 21 years (1980-2000) of annual observations. Our estimates confirm that AD effects are not small. Among other findings, new tough users have their aggregate imports depressed by 15.7 billion US$ a year (or 6.7%) as a result of the AD measures they have imposed. For a traditional user like the United States, current AD measures depress annual imports by almost 20 billion US$ on top of the cumulative negative effect of reputation. For some countries, the dampening effects of AD laws on trade flows are found to nearly offset the gains from trade liberalization.
    Keywords: antidumping;gravity equation;trade liberalization;trade flows
    JEL: F13 F14
    Date: 2006
  14. By: Souleymane COULIBALY
    Abstract: Many recent papers have pointed to ambiguous trade effects of developing regional trade agreements, calling for a reassessment of their economic merits. We focus on six such agreements currently in force in Sub-Saharan Africa, Asia and Latin America, estimating their impacts on trade flows and welfare. We combine a gravity model with kernel and bootstrap estimation techniques so as to capture the non-monotonic trade effects while imposing minimal structure. Instead of the usual dummy variables for RTAs, we propose a new variable, capturing the number of years of a country's RTA membership, and we adapt the framework proposed by Winters (1997) to relate trade effects to their welfare implications. The results indicate that only AFTA and MERCOSUR have induced positive trade and welfare effects. The remaining RTAs have produced mixed effects for their members.
    Keywords: regional trade agreement; kernel regression; bootstrap; welfare
    JEL: F11 F15 O50
    Date: 2006–04
  15. By: Angela Cheptea; Guillaume Gaulier; Soledad Zignago
    Abstract: We develop an improved shift-share methodology and employ it to estimate the trade competitiveness of 88 world countries during the 1995-2002 period and to identify factors that drove each country’s increase or drop in exports market share. Along with the export competitiveness, we consider the geographical and sectoral dimension of countries’ initial position on different import markets and of their capacity to adapt to shifts in the world economy. Differently from the traditional method employed in the literature, our procedure yields identical results regardless the order in which trade is decomposed in geographical and sectoral factors. Moreover, it produces standard errors and permits to evaluate the statistical significance of each effect.
    Keywords: International trade; competitiveness; market access; specialization; international comparison; Asia; South America; trade; shift-share; export performance
    JEL: F12 F15
    Date: 2005–12
  16. By: Christian Joerges
    Abstract: The historical evolution of free trade has been accompanied by a plethora of debates, concerning both its positive effects and social costs. During the last decade, the subject of these disputes has markedly changed. The main objective of the General Agreement on Tariffs and Trade (GATT) concluded 1947, was initially the reduction of tariffs introduced by states to protect their national economy. In this respect, the agreement has been markedly successful. Since the early 1970s, however, non-tariff barriers to free trade have moved to the centre of attention. This change of focus was fostered by more intensified domestic regulation especially in the fields of health and safety, consumer and environmental protection. These concerns are of such domestic significance that they cannot simply be abandoned for the sake of free trade; however, it also is common opinion that regulations in these areas cannot be accepted, if they merely mask protectionist interests. In 1994, the international trade system adapted to this situation by transforming the GATT into the World Trade Organization (WTO). The most important reforms included an overhaul of its procedures of dispute settlement and the conclusion of special agreements concerning non-tariff barriers to free trade such as the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) and the Agreement on Technical Barriers to Trade (TBT). These agreements aim at the balancing of their main economic objective, free trade, with domestic regulatory concerns of WTO members. This bundle of regulations has certainly furthered the emergence of transnational ‘governance arrangements’. Such new forms of ‘transnational governance’ have lent renewed importance to ‘old’ legal issues: How can new forms of transnational governance be qualified legally? What can be said about their (social) acceptance and (normative) legitimacy? Can this form of governance be ‘constitutionalized’ in such a way that law can defend or even regain its function as guarantor of and yardstick for legitimate governing?
    Date: 2006–03–01
  17. By: Anh Tu; John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Estelle Gozlan
    Abstract: We investigate the interface between trade and invasive species (IS) risk, focusing on the existing tariff escalation in agro-forestry product markets and its implication for IS risk. Tariff escalation in processed agro-forestry products exacerbates the risk of IS by biasing trade flows toward increased trade of primary commodity flows and against processed-product trade. We show that reducing tariff escalation by lowering the tariff on processed goods increases allocative efficiency and reduces the IS externality, a win-win situation. We also identify policy menus for trade reforms involving tariffs on both raw input and processed goods, leading to win-win situations.
    Keywords: agro-forestry products, exotic pest, international trade, invasive species, tariff escalation, trade flows.
    Date: 2005–10
  18. By: Joseph Francois; Julia Woerz
    Abstract: We develop a mixed complementarity programming (MCP) based estimating framework for non-tariff barriers (NTBs) to examine the evolution of market access conditions in the textile and clothing sectors, working with a panel of bilateral trade data on textile and clothing trade, underlying bilateral tariffs, and the country-pair coverage of quotas under the WTO’s Agreement on Textiles and Clothing (ATC). Our estimating framework takes advantage of the panel nature of trade data when calculating export tax equivalents while allowing for inequality constraints on the quota premium estimates. We also introduce Gaussian quadrature for estimating goodness of fit for regression-based NTB measures based on residual fitting.
    Keywords: NTB estimation, Gaussian Quadrature, import quotas, ATC, MFA
    JEL: F13 C15
    Date: 2006–04–05
  19. By: S. Patricia Batres-Marquez (Center for Agricultural and Rural Development (CARD)); Roxanne Clemens (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Helen H. Jensen (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: The structure of the pork production, slaughter, and processing sectors in Mexico has changed significantly since implementation of the North American Free Trade Agreement (NAFTA) and with rising income and increased urbanization. Today, Mexico's pork industry has become more integrated and achieved greater production efficiencies in response to increasing demand for better product quality and stricter sanitary practices in production and processing pork for both the domestic market and for export. However, despite these improvements Mexico's pork industry has not kept up with the rising domestic demand, and Mexico has become an increasingly important market for the United States. A key to the development of increased trade in both live animals and pork is growth of federally inspected or "Tipo Inspección Federal" (TIF) plant production, as well as development of marketing channels and product promotion that support high-quality consumer meat products.
    Keywords: live hogs and pork trade, Mexico, NAFTA, pork industry, pork slaughter, TIF plants.
    Date: 2006–03
  20. By: Ronald Steenblik
    Abstract: This paper, the second in a series, examines the implications of liberalising trade in three forms of renewable energy: biodiesel, solar-thermal water heaters, and geothermal energy systems. Eliminating tariffs on renewable energy and associated goods — which are 15% or higher on an ad valorem basis in many developing countries — would reduce a burden on consumers of energy, particularly people living in rural areas of developing countries, as it is in such areas that many renewable fuels and renewable-energy technologies are making, and are likely to make, their greatest contribution. Manufacturers located in OECD countries would benefit from increased trade in equipment, but so would a growing number of companies based in developing countries. In the case of biodiesel, developing countries have the potential to become major suppliers to OECD countries. For the maximum benefits of trade liberalisation in biodiesel, and solar-thermal and geothermal technologies, to be realised, however, additional reforms may be required in importing countries’ domestic policies, especially those affecting the pricing of liquid fuels, competition in the electricity sector, and protection of the environment.
    Keywords: trade, developing countries, environmental goods, environmental technologies, renewable energy
    JEL: F14 F18 Q42 Q48 Q56
    Date: 2006–04–04
  21. By: Douglas A. Irwin
    Abstract: Throughout U.S. history, import tariffs have been put on a sustained downward path in only two instances: from the early-1830s until the Civil War and from the mid-1930s to the present. This paper analyzes how the movement toward higher tariffs in the 1820s was reversed for the rest of the antebellum period. Tariff politics in Congress during this period was highly sectional: the North supported high tariffs, the South favored low tariffs, and the West was a “swing” region. In the 1820s, a coalition between the North and West raised tariffs by exchanging votes on import duties for spending on internal improvements. President Andrew Jackson effectively delinked these issues and destroyed the North-West alliance by vetoing several internal improvements bills. South Carolina’s refusal to enforce the existing high tariffs sparked the nullification crisis and paved the way for the Compromise Tariff of 1833, which promised to phase out tariffs above 20 percent over a nine year period. Although Congress could not credibly commit itself to the staged reductions or maintaining the lower duties, the growing export interests of the West  due, ironically, to transportation improvements that made agricultural shipments economically viable  gave the region a stake with the South in maintaining a low tariff equilibrium. Thus, the West’s changing position on trade policy helps explain the rise and fall of tariffs over this period.
    JEL: F1 N7
    Date: 2006–04
  22. By: FAPRI Staff
    Abstract: Senator Chambliss, chair of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, asked the Food and Agricultural Policy Research Institute (FAPRI) to analyze the latest U.S. proposal to the Doha round of WTO negotiations (see Appendix 1, U.S. Proposal for WTO Agriculture Negotiations, USTR, October 10, 2005). While the U.S. proposal provides many concrete steps to reduce farm support and trade distortions, it does not provide all necessary information for quantitative analysis of the proposal. FAPRI, through consultations with economists and staffers of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, Office of the United States Trade Representative, and U.S. Department of Agriculture, elaborated a complementary set of policy assumptions to carry the quantitative analysis. The analysis is conducted in deviation from the baseline of the FAPRI 2005 U.S. and World Agricultural Outlook. New policies put in place since the 2005 baseline was established have been accommodated to separate the impact of the policy scenario from the full set of policy assumptions.
    Date: 2005–12
  23. By: Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: New elasticities were estimated from Indonesia's 1996, 1999, and 2002 National Socio-Economic Survey, or SUSENAS, data using a double-hurdle demand specification. The estimates suggest that major changes in Indonesian household diets are expected in the coming years, as income growth is sustained and as urbanization proceeds at a fast pace. The consumption "trading-up" pattern for animal-protein source products observed in many countries may also occur in Indonesia. In this particular case, households will shift from fish to dairy and meat products. The trade impacts of this emerging consumption pattern will be determined by the cost of adjustment in Indonesia's domestic productive capacity and the influence of the country's predominantly Islamic tradition.
    Keywords: demand, household consumption, trade.
    Date: 2005–07

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