May 13th, 2019
Discussion Paper 2019/3 is now available: El-Shagi, M. / Sawyer, W.C. / Tochkov, K.: The Income Elasticity of Import Demand - A Meta Survey
Import demand has been a major research topic in international economics for the past 80 years because of its importance for analyzing trade and evaluating trade policies. The goal of this paper is to survey the literature and conduct a meta-analysis of empirical studies on import demand with the intention of clarifying the effect of economic development on income elasticity. In particular, we test the hypothesis that higher income levels are associated with a more elastic import demand. We apply a combination of parametric and non-parametric methods on estimates from a sample of 152 papers published over the period 1975-2014 and find that this relationship is signicant and robust. Specifically, kernel densities of income elasticity estimates for high-income countries in North America and Europe are shown to exceed those for poorer parts of the world. The results from quartile regressions confirm this pattern and establish its robustness when controlling for the effect of model specifications.