The Long-run Implied Income Elasticity of Demand of Forest-based Products in International Trade

Abstract

The "income elasticity of import demand" is a key concept in international trade in as much that it enables an identification of commodities expected to experience rapid growth in world trade. In this article a theoretical basis for estimation of the parameter is discussed and the methodology is applied to thirtyseven commodities (including eleven forest-based products) of interest to exporters in India. The results reveal that the income elasticity of demand of forest based products in world trade is high. A consideration of the income and price elasticities of import demand indicate that the forest-based esports may be expected to ahieve very high growth rates ia the future. It is evident that it may be worthwhile for India to concentrate in these commodities as future foreign eschange earners for the country.