A Country-Differentiated Import Demand Model for Fresh Tomatoes in the United States: an Estimation of Price and Income Elasticities for 1991 through 2014

This study applies the System-Wide approach to demand estimation to U.S. tomato import data to obtain demand sensitivity measure (elasticities) estimates for this commodity. Using the Rotterdam model as a parametrization of the System-Wide approach, a demand model is estimated for monthly aggregated tomato imports from Mexico, Canada, and the rest of world; as well as the U.S. domestic tomato production. Significant estimates for income and own-price and cross-elasticities measures are found for tomatoes from all countries. All tomatoes are found to be own-price inelastic. U.S. and Mexico tomatoes are found to be expenditure elastic, while tomatoes from Canada and the rest of the world are found to be expenditure inelastic. This suggests a low sensitivity of demand for U.S. consumers with respect changes in tomato own-price, regardless of country of origin; while for the case of U.S. and Mexico demand will increase if U.S. tomato expenditure rises, and demand will decrease for Canada and rest of the world tomatoes if U.S. tomato expenditure rises. Additionally a variant of the Rotterdam model is estimated to study the effect of exchange rate fluctuations on the demand for tomatoes, using monthly data for nominal exchange rates between the U.S. and Mexico, and the U.S. and Canada it is found in both cases, that increased U.S. Dollar strength with respect to the currency of either country will result in increased imports