The Relationship Between the Income and Price Elasticities of Demand for United States Exports

Abstract

R ECENT empirical studies in international trade, by Junz and Rhomberg [10], Kreinin [14] and in a major contribution, by Houthakker and Magee [6], have stressed the importance of different price and income elasticities of demand for exports and imports among countries as determinants of trade patterns. However, questions as to why such differences in elasticities arise remain open. An important component of the problem is whether the price and income elasticities of demand for individual exporters' products vary systematically across customer markets. This paper attempts partially to address the latter issue by examining the elasticities of United States exports of manufactured goods. The major finding is that a relationship exists between the competitiveness of United States manufactured goods exports in various foreign countries and the nature of the customer market. The result has implications, outlined below, for projections of future United States trade balances.