Measuring Price and Income Elasticity of Demand Function of the Iranian Imports


1 Faculty of Humanities and Law, Department of Economics, Islamic Azad University of Isfahan (Khorasgan) Branch, Isfahan, Iran.

2 Faculty of Economics, Management and Social Sciences, Shiraz University, Shiraz, Iran.

3 Tehran Faculty Petroleum, Petroleum University of Technology, Tehran, Iran.

4 Department of Economics, Islamic Azad University of Isfahan (Khorasgan) Branch, Isfahan, Iran.



Investigating the import demand function has particular importance in identifying the macroeconomic models and effectiveness and commercial efficiencies of the Iranian economy. For this reason, one of the major issues that can be addressed in the field of importing goods is the estimation of import demand function and investigation of impacting factors on imports. Therefore, in this paper, by using seasonal data for the period 1992-2017 and applying the almost ideal demand system (AIDS), and using a seemingly unrelated regression (SUR) econometric technique, we have estimated import price and income elasticities for five commodity groups based on one-digit tariffs code for the Iranian economy. The empirical results indicated that the import allocation pattern is single-stage and depends on domestic sales. In addition, the own-price elasticities had a negative sign that supports import behavior. Cross-price elasticities also showed a poor complementarity between the other portable and metal commodities and, Social & personal services and Financial & Business Services, domestic sales with Agricultural, forestry & fishing products, other portable & metal commodities, and Financial & Business Services groups. The expenditure elasticities in five commodity groups were significant, except in the first group, which implied the effectiveness of demand for each commodity group relative to income.


Abedin Moghanaki, M., & Khosravi Nejad, A. (2014). Iranian Industrial Import Demand Function. Quarterly Journal of Economic Strategy, 3(8), 77-101.
Alnafissa, M., & Alderiny, M. (2020). Analysis of Saudi Demand for Imported Honey Using an Almost Ideal Demand System (AIDS). Journal of the Saudi Society of Agricultural Sciences19(4), 293-298.
Athukorala, P. C., & Khan, F. (2016). Global Production Sharing and the Measurement of Price Elasticity in International Trade. Economics Letters139, 27-30.
Belicka, S. (2013). Estimation of Import Demand Models for the Pharmaceutical Products in Australia. Academy of Taiwan Business Management Review9(1), 57-72.
Crucini, M. J., & Davis, J. S. (2016). Distribution Capital and the Short- and Long-run Import Demand Elasticity. Journal of International Economics100, 203-219.
Çulha, O. Y., Eren, O., & Öğünç, F. (2019). Import Demand Function for Turkey. Central Bank Review19(1), 9-19.
Dadgar, Y., & Nazari, R. (2010). The Analysis of the Demand Function of Import in Iranian Economy for the Period, 1353-86. Quarterly Journal of Quantitative Economics, 7(1), 1-22.
Deaton, A., & Muellbauer, J. (1980). Economics and Consumer Behavior. Cambridge: Cambridge University Press.
De Boer, P. M. C., Martinez, C., & Harkema, R. (2000). Trade Liberalization and the Allocation over Domestic and Foreign Supplies: A Case Study for Spanish Manufacturing. Applied Economics32(6), 789-799.
Diz, A. (1970). Money and Prices in Argentina 1953-62. In D. Mieselman (Ed.), Varieties of Monetary Experiences. Chicago: University of Chicago Press.
Farah Bakhsh, N., & Mehrabian, A. (2001). Analyses of Dynamics of Import Demand Function. Journal of Economic Research, 1(2), 29-42.
Fedoseeva, S., & Zeidan, R. (2018). How (A) Symmetric is the Response of Import Demand to Changes in Its Determinants? Evidence from European Energy Imports. Energy Economics69, 379-394.
Fukumoto, M. (2012). Estimation of China's Disaggregate Import Demand Functions. China Economic Review23(2), 434-444.
Giansoldati, M., & Gregori, T. (2017). A Note on the Estimation of Import Trade Demand Functions. Economics Letters157, 133-135.
Godarzi, M., Mortazavi, S. A., & Peykani, Gh. (2007). Investigating Demand of Main Groups of Consumable and Comestible Goods in Urban Area of Iran by Applying Two-Stage Budgeting Pattern. Agricultural Economics and Development, 15(57), 131-159.
Hamori, S., & Matsubayashi, Y. (2001). An Empirical Analysis on the Stability of Japan’s Aggregate Import Demand Function. Japan and the World Economy13(2), 135-144.
Hemphill, W. L. (1974). The Effect of Foreign Exchange Receipts on Imports of Less Developed Countries. Staff Papers21(3), 637-677.
Hummels, D., & Lee, K. Y. (2018). The Income Elasticity of Import Demand: Micro Evidence and an Application. Journal of International Economics113, 20-34.
Katsimi, M., & Moutos, T. (2011). Inequality and the US Import Demand Function. Journal of International Money and Finance30(3), 492-506.
Kanjilal, K., & Ghosh, S. (2014). Income and Price Elasticity of Gold Import Demand in India: Empirical Evidence from Threshold and ARDL Bounds Test Cointegration. Resources Policy41, 135-142.
Mitra, D., & Shin, J. (2012). Import Protection, Exports and Labor-Demand Elasticities: Evidence from Korea. International Review of Economics & Finance23, 91-109.
Motafaker Azad, M., Agajani, H., & Amjadi, K. (2007). Studying the Demand Schedule and Consumption Behavior of the Urban Households of the Country. The Journal of Productivity Management, 1(2), 199-226.
Mukherjee, P., Mukherjee, V., & Das, D. (2017). Estimating Elasticity of Import Demand for Gold in India. Resources Policy51, 183-193.
Nasrollahi, M. (2005). Total Iranian Import Demand Function: A Reassessment with the "Bounds Testing Approach". Journal of Economic Research, 39(3), 91-112.
Oladosu, G. A., Leiby, P. N., Bowman, D. C., Uría-Martínez, R., & Johnson, M. M. (2018). Impacts of Oil Price Shocks on the United States Economy: A Meta-Analysis of the Oil Price Elasticity of GDP for Net Oil-Importing Economies. Energy policy115, 523-544.
Panahi, H., Sojoodi, S., & Marandian, M. (2016). The Price and Income Elasticity's of Import Demand of Drugs in Iran. Journal of Economic Research, 51(4), 777-799.
Raissi, M., & Tulin, V. (2018). Price and Income Elasticity of Indian Exports - the Role of Supply-Side Bottlenecks. The Quarterly Review of Economics and Finance68, 39-45.
Ranjbar, H., & Kabirian, M. (2011). The Impact of Removal Subsidies on the Structural Stability of Consumer Demand Pattern Coefficients. Applied Economics, 2(4), 61-88.
Ranjbar, H., & Merikh, S. (2009). Investigating the Structure of Import Combination Demand Function (Capital, Intermediate and Consumable) of Iran during 1978-2004. International Economic Studies, 20(2), 75-88.
Ranjbar, H., Daie Karim Zadeh, S., & Mosavi Asl, S. A. (2015). Estimation of Antibiotic Drug Group Imports’ Demand Function in Iran. Health and Psyche Management, 6(3), 43-53.
Sepanlo, H., & Ghanbari, A. (2011). Investigating the Factors Affecting Iran's Import Demand by Intermediate, Capital and Consumer Commodities. Iranian Journal of Trade Studies, 15(57), 209-233.
Soderbery, A. (2015). Estimating Import Supply and Demand Elasticities: Analysis and Implications. Journal of International Economics96(1), 1-17.
Sun, L., & Niquidet, K. (2017). Elasticity of Import Demand for Wood Pellets by the European Union. Forest Policy and Economics81, 83-87.
Tayyebi, S., & Ranjbar, H. (2005). An Investigation of Iran’s Import Demand Structure: An Application of AIDS Model (1978-2002). Iranian Journal of Economic Research, 6(21), 1-21.
Tang, T. C. (2003). Japanese Aggregate Import Demand Function: Reassessment from the ‘Bounds’ Testing Approach. Japan and the World Economy15(4), 419-436.
Wang, Y. H., & Lee, J. D. (2012). Estimating the Import Demand Function for China. Economic Modelling29(6), 2591-2596.
Winters, L. A. (1984). British Imports of Manufactures and the Common Market. Oxford Economic Papers36(1), 103-118.
Zellner, A. (1962). An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias. Journal of the American Statistical Association57(298), 348-368.