International Cross Section Estimates of Demand for Use in the GTAP Model

Abstract

The making of projections often requires an economy-wide perspective, and the estimation of consumer demands at the international level. In this paper, an implicit, directly additive demand system (AIDADS) is estimated using cross-country data on consumer expenditures from the International Comparison Program (ICP), and then from Global Trade Analysis Project (GTAP) data. The two data sets are found to produce results that are quite consistent despite their differing origins, and the fact that the former is based on consumer goods that embody wholesale/retail margins, while margin demands are treated separately in GTAP. Given the similarity of the results, the estimation based on GTAP data is favored because it is readily matched to input-output based production and trade data, and provides valuable new information concerning how aggregate margin expenditures are related to per capita income.