| Decisions on the effects of safeguard mechanisms have been more on theoretical grounds often due to lack of precise estimation of elasticities that can be used to calibrate welfare effects. Alston et.al., (2002) demonstrate that the double logarithmic demand models can be augmented by Slutsky equation to create compensated demand equations which, when estimated result into precise compensates elasticities important for welfare analysis. This study demonstrates a similar adjustment on a dynamic double log Imperfect Import substitutes model to allow for estimation of compensated and uncompensated elasticities. Elasticities from three estimators OLS, SURE and IV indicate that imported wheat, maize and rice are normal commodities in Kenya. The uncompensated... |
