Three Essays on Trade Policy and Impacts of Regional Demographic Changes

Abstract

The third paper attempts to calculate the Korean import demand elasticities on a disaggregate level using three approaches-the traditional approach, household maximization approach, and GDP function approach. The traditional approach has no micro-foundations and the household maximization approach has cross price problems. To address the cross price problems, I apply a modified GDP function approach. The unit root test results using the Augmented Dickey-Fuller (ADF) test and Phillips-Perron (PP) test show that, for most of the commodities, the unit root cannot be rejected at the significance levels. However, results from the Johansen procedure for the cointegration test show that variables under consideration are cointegrated. Therefore, I estimate the coefficients using the SC (Schwarz criterion) selection model and calculate the import demand elasticities. The estimation results show that the weighted average import price elasticities of Korean imported mining and manufacturing goods are between -0.12 and -0.36.