Determinants of import demand for Egyptian potatoes in Germany and the United Kingdom

Abstract

The European Union ( EU) is the major import market for Egyptian fresh potatoes. Germany and the United Kingdom ( UK) jointly imported about 44% of Egyptian potato exports to the EU during the period 1994-2012. This study sought to identify the determinants of import demand for Egyptian potatoes in these two countries. A general differentiated demand system approach was used to estimate conditional potato import demand per country. For each country, it was assumed that the system of conditional import demand equations for potatoes is specified according to the sources of origin and also depends on all imported potato prices and total import potato expenditure. When estimated econometrically, this import demand model allows conditional price and expenditure elasticities to be derived. The econometric results indicated that with an estimated elasticity of 1.95, Egyptian potato exports responded significantly to total expenditure on imported potatoes by Germany. On the other hand, Egyptian potato exports to Germany did not exhibit significant price responses. In all cases but one, estimated conditional uncompensated price elasticities were not statistically different from zero. However, more interesting results were obtained concerning the price responses of Egyptian potato exports to the UK, whereby the conditional ( uncompensated) direct elasticity of potato imports from Egypt to the UK (-0.71) showed an inelastic response to its own price. Furthermore, Egyptian potato exports seemed to compete on the UK market with potatoes originating from Israel and France, while they displayed complementarity with Dutch imports.