Import demand for fresh tomatoes and onions in Saudi Arabia

Abstract

Scope and Method of Study:

Currently, subjective estimates for elasticities are used to adjust agricultural trade policies while Saudi Arabia is going through procedures for accession to the World Trade Organization (WTO). An Almost Ideal Demand System model (AIDS), a Rotterdam model (ROT), a Central Bureau of Statistics model (CBS), a National Bureau of Research model (NBR), and a general model were specified to estimate Saudi Arabia's import demand for tomatoes and onions. Symmetry and homogeneity restrictions were tested, and nested tests were conducted to determine which model specifications were most appropriate. Model estimates were used to calculate expenditure, own-price, and cross-price elasticities of demand.

Findings and Conclusions:

Symmetry and homogeneity restrictions were not rejected for any of the five models for onions, but they were rejected for all but two of the models (ROT and NBR) for tomatoes. Nested tests indicated that, of the five models, the general model was most appropriate for both tomatoes and onions. Expenditure elasticities indicate that as consumers increased expenditures on imported onions, most of those expenditures went to onions from India. As expenditures on tomatoes increased, most went to tomatoes from Syria. Own-price elasticities indicate that demand is more elastic for some sources than for others. This suggests that changes in tariffs will affect imports from sources more than others.