Estimate of Armington substitution elasticity for fishery products in Iran

1- Science and Research Branch, Islamic Azad University, Tehran, Iran *Corresponding author's Email:
1- Science and Research Branch, Islamic Azad University, Tehran, Iran
*Corresponding author's Email:
The price transmission from the international market to the domestic market of tunas was investigated in the present research. For this purpose, the elasticity of substitution between tuna imports with goods produced in Iran (Armington Elasticity) was calculated. Armington elasticity reflects a degree of substitution between commodities produced domestically and those produced abroad. A greater elasticity indicates that buyers did not discriminate between domestic and foreign produced commodities and the buyers considered them the same. Therefore, any policy to influence the price of imported commodities will be effective in regulating the prices of commodities produced domestically. In the present study, in order to calculate Armington elasticity, the annual data for the year between 1974 and 2014 were used along with the technique of maximum entropy (ME). In addition to Armington elasticity, the least square estimated and vector error correction model (ECM) was estimated using entropy maximization. The results showed that Armington tension in the long-term was greater than that in the short-term. Even though this means the product has been imported, it serves as an alternative for domestically produced commodities; therefore, buyers do not see any difference between them. Additionally, the prices of these products have been affected by global prices and the swings in global prices can be transported more easily to the internal market for these products in the long-term than in the short-term.
Keywords: Price transfer, Maximization of entropy, Armington
Zeraatkish S.Y.1*; Rashidi F.1; Rashidi D.1
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