Income and Price Effect on Bilateral Trade and Consumption Through Expenditure Channel: A Case of Chickpea
Abstract
Income and price affect chickpea trade expenditure and consumption expenditure share respectively. An empirical model was estimated to examine the trade effect through the expenditure channel using Almost Ideal Demand System and thus considering non-homotheticity in preferences. The results of the analysis indicated that global chickpea trade has increased from 100000 metric tons in 1988 to about 2.5 million metric tons in 2015. Between the same period consumption and production of chickpea had an increasing trend. USA and Canada had become part of the top 10 chickpea producers by 2015 signifying the increasing demand of chickpea in western countries. Factors that affected relative chickpea trade to importers income were relative market size of the exporter, bilateral distance and contiguous borders. Also, a percentage increase in the adjusted mean income of chickpea consuming country will lead to 94% decrease in the consumption of chickpea when country pair effects are considered.