An econometric analysis of the olive oil market in Italy

Abstract

This paper analyzes the olive oil market in Italy. In the specified model, consumption and import demand form conditional demand systems and the relevant policy variables are endogenous. Empirical evidence based on a three-fat almost ideal demand system shows that olive oil is elastic with respect to the group expenditure; that olive oil, seed oils, and butter behave like net substitutes and as gross complements; and that olive oil conditional demand is rather reactive to its own price. The policy multipliers support answers that are coherent with the assumptions, but contradict common opinions. In particular, sectoral instruments are not that effective in enhancing the market. Copyright 1991 by Oxford University Press.