Substitutability between US Domestic and Imported Forest Products: The Armington Approach

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Abstract:

This article estimates the Armington elasticities of substitution between US domestic and imported forest products. The results indicate that US domestic and foreign forest products are far from perfect substitutes for each other. The low substitutability calls into question the effectiveness of import restrictions that alter the relative price between domestic output and imports and the trade impact assessments that impose the law of one price. The degree of substitutability is higher in the long run than in the short run and varies across product aggregation levels. The elasticity estimates, though remaining relatively stable for most forest products, show an increase since the late 1980s for the overall forest product, implying that US domestic and imported forest products have, in general, become more substitutable over time.

Keywords: Armington elasticity of substitution; domestic sales; imports; product differentiation

Document Type: Research Article

Affiliations: Department of Forest Science Texas A&M University 305 Horticulture/Forest Science Bldg. 2135 TAMU College Station, TX 77843-2135—(979) 862-4392; j-gan@silva.tamu.edu., Fax: (979) 845-6049

Publication date: January 1, 2006

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