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International Economics and Economic Policy

, Volume 11, Issue 4, pp 561–574 | Cite as

Price and income elasticities: evidence from commodity trade between the U.S. and Egypt

  • Mohsen Bahmani-OskooeeEmail author
  • Amr Samir Sadek Hosny
Original Paper
  • 339 Downloads

Abstract

Elasticity approach to balance of payments postulates that a country can enjoy an improvement in its trade balance in the long run if sum of import and export demand price elasticities exceed unity, a condition known as the Marshall-Lerner condition. Previous research tested this condition either using aggregate trade data between one country and rest of the world or between two countries and provided mixed results. They are all said to suffer from aggregation bias. To remove the bias, in this paper we concentrate on trade flows of two countries, i.e., the U.S. and Egypt and disaggregate their trade flows by commodity. The estimates reveal that the ML condition is met in 28 out of 36 industries that trade between the two countries.

Keywords

The Marshall-Lerner Condition Egypt The U.S Commodity Trade 

JEL Classification

F31 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Mohsen Bahmani-Oskooee
    • 1
    Email author
  • Amr Samir Sadek Hosny
    • 1
  1. 1.The Center for Research on International Economics and Department of EconomicsThe University of Wisconsin-MilwaukeeMilwaukeeUSA

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