Competition between US catfish and imported fish – A demand system analysis

Monthly  data from January  1999  through  December  2007 is used  to  estimate demand interrelationships between domestic and imported farmed fish in the US.  Specifically, a demand model  is  estimated  for  four  products:  imported  frozen  tilapia  fillets,  imported  frozen  salmon fillets, imported frozen catfish fillets, and US-produced frozen catfish fillets.  The demand model used in this analysis is the Linear Approximate Almost Ideal Demand System (LA/AIDS), which is extended to include dummy variables to indicate the effect of a labeling law and US anti-dumping duties.  The system is estimated with and without symmetry and homogeneity imposed to assess the  sensitivity  of  results  to  theoretical  restrictions.    In  addition,  the  model  is  estimated  by Seemingly Unrelated Regression (SUR) with and without correction for serial correlation and by Three  Stage  Least  Squares  (3SLS)  to  assess  the  sensitivity  of  results  to  estimation  procedure.  Marshallian  own-price  elasticities  estimated  from  the  preferred  models  is  significant  and negative as expected.  The demand for imported frozen catfish fillets is found to be price elastic at -3.22 while the demand for domestic frozen catfish fillets is inelastic at -0.69.  Opposite to tilapia imports, the demand for salmon imports is estimated to be price elastic at -1.51.  The demand for imports of catfish, tilapia, and salmon are expenditure elastic at 2.90, 2.08, and 1.43 respectively while the demand for domestic frozen catfish fillets is expenditure inelastic at 0.38.  Thus, the demand for imported farmed fish is much more sensitive to changes in the U.S. business cycle than the demand for the domestic products.   

 

Allen elasticities are calculated to determine the degree of substitutability among the four products.  The closest substitute for domestic frozen catfish fillets is imported frozen catfish fillets (Allen elasticity = 5.11), followed by imported tilapia (1.09). Imported salmon is found to be a weak substitute (0.45) to domestic catfish. Imported salmon competes more closely with imported catfish (12.33) than with imported tilapia (2.80).  Imported tilapia and imported catfish show a strong complementary relationship (-18.95), which means a rise in the price of either product causes the demand for the other to fall.   

 

The U.S. antidumping tariff against catfish imports from Vietnam is shown to positively affect  the  market  shares  of  salmon  and  tilapia  imports  and  negatively  the  market  shares  of imported and domestic catfish.  However, the effects are small in absolute values with the larger for imported catfish (-0.08) and the smaller for domestic catfish (-0.03). The labeling law, passed by  the  U.S.  Congress  in  2001  to  differentiate  Vietnamese  frozen  catfish  fillets  from  domestic frozen catfish fillets has no significant effect on the demand curves for the two products based on the 3SLS estimates.