Two-Stage Agricultural Import Demand Models Theory and Applications

The Armington trade model distinguishes commodities by country of origin and import demand is determined in a separable two-step procedure. The Armington framework has been applied to numerous international agricultural markets with the objective of modelling import demand. The purpose of this paper is to test the Armington assumptions of homotheticity and separability with data from the international wheat market. The empirical results overwhelmingly reject these assumptions. This has important implications for international trade modelling