Analysis of the impact of fish imports on domestic crawfish prices and economic welfare using inverse demand systems

This study is mainly intended to determine quantitatively the economic effects of crawfish imports on the domestic crawfish industry. Inverse demand systems are used to estimate the price and scale flexibility as an indicator for the effects of imports on crawfish domestic price. A variety of algebraic forms for empirical consumer allocation models have been developed. Economic theory, however, does not provide the necessary fundamental criteria to choose ex ante among the alternative specifications. Bartern (1993) and Brown, Lee, and Seale (1995) examined a family of inverse demand systems, showing that the integrated demand system, in its own right, has more parameters than any of the component systems, and is, therefore, more flexible. This study also finds that among the different type of inverse demand systems the generalized inverse demand model (GIDS) is a better fit for the data used in this study. As expected, the cross price flexibility of imported crawfish and scale flexibility in the domestic crawfish equation are shown to be negative, implying that crawfish imports have negative effect on domestic crawfish price and imports of aggregate fish also have a negative effect on the domestic crawfish price. At the same time, cross price flexibilities show either substitutability or complementarity. The Morishima elasticity of complementarity was used as a more adequate measure of interaction between commodities than the coefficients of the Antonelli matrix. The study showed that the elasticities of complementarity are all positive, implying both the tendency toward complementarity and the negativity of the own-quantity elasticities. As the negativity of cross price flexibility of imported crawfish indicates, domestic crawfish producers will suffer economic losses from increased imports of crawfish, while the domestic crawfish consumer will be better off. Even though the economic loss to the domestic crawfish producers resulting from increases in the imports of crawfish is relatively small compared with the gains to domestic crawfish consumer welfare, the impact of imports is serious to the domestic crawfish industry because the loss is accrued to a small number of domestic crawfish processors. This study however, shows a net social welfare gain from increasing crawfish imports