Formulation of models and estimation of selected textile and apparel import, output and employment elasticities for the United States

The purpose of this study is to estimate the impact of textile and apparel imports upon employment in the domestic US textile and apparel industries, upon the production level of US domestic textiles and apparel, and upon selected textile and apparel production resources. The objectives are to formulate and estimate models and elasticities for policy utilization. The models that were estimated are textile and apparel import demand functions, textile and apparel output functions, and resource or input adjustment functions. Separate equations were estimated for textiles and apparel.

The resulting elasticities that were estimated include direct price elasticity of import demand, cross price elasticity of import demand, income price elasticity of import demand, employment elasticity of output, import elasticity of output, and output elasticity of employment.

The data set consisted of monthly time series observations for the time period 1974-1987. Data was primarily from published secondary sources, but some unpublished series were obtained form the Federal Reserve Board and the International Trade Commission.

Estimation of the statistical models was accomplished by Ordinary Least Squares and Generalized Least Squares. The variables were transformed to their natural logarithms and the regressions were run on the transformed variables to obtain constant-elasticity functions.

Import demand was hypothesized to be a function of relative prices, consumer income, and adjustment variables. Output was posited as a function of the level of employment, capital price, and imports. The input adjustment functions were expressed as functions of relative factor prices, exogenous output, trend, and lagged factors.

The empirical results were quite reasonable. Most coefficients were statistically significant, and their signs were consistent with a priori theoretical considerations. Thus, the elasticities provided by this study should be very useful in policy applications.