The Determinants of US Olive Oil Imports

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2022-12
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Hammami, A. Malek
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Beghin, John
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Center for Agricultural and Rural Development

The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.

CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.

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We investigate the determinants of U.S. bilateral imports of olive oil and their dynamics from shocks in foreign supplies and changes in U.S. olive oil demand, using an augmented gravity framework that leads to an equilibrium of bilateral trade flows from olive oil exporters to the U.S. market. The empirical specification is applied at the disaggregated HS-6 level in a panel dataset, and three estimation techniques (truncated OLS, PPML, Heckman), for which the latter two account for zero trade flows, the extensive margin of trade and the potential censored distribution of exports with zero trade flows. We run Reset and HPC tests to qualify our results. On the supply side, exporters’ capacity to exports, multilateral trade resistance, and immigrants’ networks into the US are strong determinants of the bilateral trade flows for both aggregate olive oil exports and for virgin olive oil exports, On the consumer side, U.S. GDP, the import unit value, and immigrant network effects are robust determinants of bilateral flows as well for aggregate and virgin olive oil trade flows. Migrants’ stock, exporters’ GDP and population, and total exports revenues increase the probability of an exporter entering the U.S. market. We could not find robust evidence of consumer behavior being influenced by popular press measures of the emergence of Mediterranean diet and olive oil, or measures of cultural globalization of U.S. consumers.
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