The Elasticity of Export Demand for U.S. Cotton

The conceptually relevant elasticity for policy analysis is the total export demand elasticity, which takes into account feedback effects of the U.S. price on other countries' prices. In this paper, a total export demand elasticity for U.S. cotton is estimated in an extended Armington framework. The results indicate that the export demand facing the United States is probably elastic; however, estimated total demand elasticities are considerably less elastic than the estimated direct demand elasticities, which do not account for feedback effects resulting from finite excess supply elasticities in the rest of the world.