A Dynamic Application of the AIDS Model to Import Demand for Tropical Fresh Fruits in the USA

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1 A Dynamc Applcaton of the AIDS Model to Import Demand for Tropcal Fresh Fruts n the USA Authors Klungu Nzaku Postdoctoral Researcher Center for Busness and Economc Research 149 Bdgood Hall, The Unversty of Alabama Tuscaloosa, Alabama Emal: knzaku@cba.ua.edu Jack E. Houston Professor Department of Agrcultural and Appled Economcs 312 Conner Hall, The Unversty of Georga Athens, Georga Emal: jhouston@uga.edu Esendugue Greg Fonsah Assocate Professor Department of Agrcultural and Appled Economcs The Unversty of Georga Tfton Campus, P.O. Box RDC Tfton, GA Emal: gfonsah@uga.edu Selected Paper prepared for presentaton at the Internatonal Assocaton of Agrcultural Economsts (IAAE) Trennal Conference, Foz do Iguaçu, Brazl, August, Copyrght 2012 by Nzaku, Houston and Fonsah. All rghts reserved. Readers may make verbatm copes of ths document for non commercal purposes by any means, provded that ths copyrght notce appears on all such copes.

2 A Dynamc Applcaton of the AIDS Model to Import Demand for Tropcal Fresh Fruts n the USA Abstract We estmate a dynamc verson of an almost deal demand system (AIDS) model for U.S.A. mports of fresh tropcal fruts: bananas, pneapples, avocadoes, papayas, mangoes/guavas, grapes and other fresh frut mports. An error correcton model specfcaton s justfed after unt root and contegraton test results confrm nonstatonarty and contegraton of the data. Estmated ncome elastctes show that fresh grapes and other fresh frut mports appear to be consdered luxury commodtes. All own-prce elastctes were negatve and sgnfcant. Whle mported bananas, pneapples, U.S.A. grapes and other fresh frut were qute nelastc, demand for papayas and mangoes/guavas were elastc. Fresh fruts that are shown to be complementary to mported fruts nclude bananas, mported grapes, U.S.A. grapes and avocados, and mported avocados/other fresh fruts. Key Words: Tropcal Fruts, Import Demand, Almost Ideal Demand Systems, Error Correcton

3 A Dynamc Applcaton of the AIDS Model to Import Demand for Tropcal Fresh Fruts n the USA Introducton Demand for fresh fruts has rsen n the U.S. for the last three decades due to a combnaton of factors. The purchasng power of U.S. consumers rose over the years due to rsng personal ncome, whle research evdence n health, food, and nutrton also modfed U.S. consumer perceptons and habts toward consumng more fresh fruts and vegetables. The heghtened nflux of an mmgrant populaton accustomed to freshproduce dets, manly Asans, Afrcans, the Carbbean and Hspanc populatons, have also mpacted the demand for fresh fruts. Supply factors, such as the largely unfavorable U.S. contnental clmate and a lmted farm labor supply, on the other hand, have restrcted the ablty of U.S. producers to respond to the rsng demand, makng mports the more vable soluton to satsfy the rsng demand for fresh fruts (Martn & Thompson, 1992; Pollack, 2001; Lucer, Pollack, Al, & Perez, 2006; Huang & Huang, 2007; Wells & Buzby, 2008; Nzaku, Houston, & Fonsah, 2010). Free trade agreements, such as NAFTA and CAFTA, and technologcal advances n shppng and handlng of fresh produce have also provded more access to fresh frut mports over longer perods of tme. Thus, the mportance of mports to U.S. fresh frut consumpton contnues to grow. Accordng to USDA reports, between 1985 and 2005, the mport share of U.S. frut consumpton rose from 2.3 percent to 15.5 percent for ctrus and from 41.2 percent to 53 percent for non-ctrus fruts (Huang & Huang, 2007). The mport share s even hgher for U.S. tropcal fruts consumpton, due to clmatc factors. The annual value of

4 fresh fruts and vegetable mports ncreased from US$2.7 bllons to US$7.9 bllons from 1992 to 2006, of whch tropcal fresh fruts were the prmary mports. The man fresh frut mports comprse of bananas, grapes, and other tropcal fruts such as guavas, mangoes, and papayas wth bananas accountng up to 44% of the total mported fresh fruts. These fruts largely orgnate from banana-exportng countres, the southern hemsphere, and Mexco (Huang and Huang 2007). Despte these developments, few studes have examned demand for fresh fruts mports, partcularly tropcal fruts. Most of the avalable lterature focuses on the compettveness of U.S. farm fresh produce n general or n the domestc market (You, Epperson, & Huang, 1996; Cook, 2001; Pollack, 2001) and on the man U.S. export markets for fresh (Lee, Seale, & Jerwryapant, 1990; Seale, Sparks, & Buxton, 1992; Sparks, 1992; Yang & Koo, 1994; Andayan & Tlley, 1997; Schmtz & Seale, 2002). Lttle reference has been made to the U.S. fresh frut mport market except for bananas and the mport demand for frut juces (Fonsah & Muhammad, 2008). Ths study contrbutes to the few exstng publshed studes by analyzng the short-run U.S. mport demand for the top tropcal fresh fruts, whch comprse the bulk of U.S. fresh frut mports. We estmated a dynamc verson of the Almost Ideal Demand System (AIDS) model for U.S. mports of tropcal fresh fruts by ncorporatng contegraton and an error correcton concept. The fresh tropcal fruts selected for the study nclude bananas, pneapples, avocadoes, papayas, mangoes/guavas and grapes. For comparatve coverage, all other fresh frut mports and U.S fresh grapes are ncluded n the estmated system. The objectves of the study are to estmate the short-run elastctes of demand for the major tropcal fresh fruts mported to the U.S.

5 The remander of the paper s organzed n sectons as follows. A bref revew of tropcal fresh frut mports and the related lterature are presented n the next two sectons. A detaled presentaton of the methods of analyses and a descrpton of the data, results and dscusson are followed by mplcatons and conclusons. Trends and Lterature Revew Snce the late 70 s, U.S. demand for fresh fruts and vegetables, and especally for tropcal fruts, has been rapdly ncreasng due to rsng U.S. consumer ncomes, nearly acqured taste by Amercans who have lved overseas, ncreased awareness of the health benefts of consumng more fresh produce, and the growng mmgrant populatons n the U.S., especally Afrcans, the Carbbean, Asans and Hspancs. These cultures typcally ncorporate more fresh produce nto ther dets. However, the ablty to rase domestc producton to meet the ncreased demand of tropcal fresh fruts s mpared by an unfavorable clmate and the avalablty of farm labor, gven the labor-ntensve nature of fresh frut producton (Martn & Thompson, 1992; Cook, 2001; Huang & Huang, 2007). Consequently, the U.S. s manly dependent on mports to satsfy ts demand for tropcal fresh fruts. Although the demand for fresh frut mports has rsen steadly over the last three decades, most of that growth was for tropcal fresh fruts, manly mangoes/ guavas, papaya, pneapples, avocados, and fresh grapes. The pcture n Fgure 1 shows the growth of U.S. mports of fresh frut mports from 1990 to The value of fresh mported pneapples, mangoes, guavas, papayas, and avocados was sx tmes greater n 2006 compared to 1990, whle the mported value for grapes n 2006 grew by over 250 percent

6 compared to Fresh bananas, whch comprse the bulk of fresh frut mports, showed no sgnfcant growth durng that entre perod (Huang & Huang, 2007). U.S. fresh frut mport supply s domnated by a few regons, perhaps due to hgh transport costs, the pershablty of fresh fruts, and santary and phytosantary (SPS) controls (U.S. Department of Agrculture, 2008a; U.S. Department of Agrculture, 2008b). The man sources of U.S. fresh frut mports are the so-called banana-exportng countres, the southern hemsphere countres, and NAFTA partners. The banana exportng countres nclude Colomba, Costa Rca, Ecuador, Guatemala, Honduras and Panama and supply 36% of fresh frut mports, of whch two-thrds are bananas (Huang & Huang, 2007). Second to the banana-exportng countres n supplyng U.S. wth fresh fruts mports are the Southern Hemsphere countres, whch nclude Argentna, Australa, Brazl, Chle, New Zealand, South Afrca, and Peru. Together, Southern Hemsphere countres supply 32% of U.S. fresh frut mports. The thrd major source of U.S. fresh frut mports s NAFTA, whch contrbutes approxmately 27% of the total fresh frut mports, mostly from Mexco (Cook, 2001; Huang & Huang, 2007; U.S. Department of Agrculture, 2007). The entry of more tradng partners, such as the Domncan Republc-Central Amerca Free Trade Agreement (CAFTA-DR) and the Chle-U.S. Free Trade Agreement, further mproved the avalablty of mports and encouraged more consumpton of exotc fresh fruts. Other supply factors that have encouraged mports nclude mproved technology n shppng and storage, U.S. farm labor shortages and costs, and a largely unfavorable U.S. contnental clmate ( Lucer, Pollack, Al, & Perez, 2006). As a result,

7 the U.S. ncreasngly depends on mportaton of tropcal produce to satsfy ts domestc demand. Modelng Approach Common mport demand analyss approaches nvolve the use of consumer demand theory or producton theory. The consumer demand theory approach treats mports as fnal products that drectly enter a consumer s utlty functon (Schmtz & Seale, 2002), whle producton theory treats mports as nputs (Washngton & Klmer, 2002). The consumer demand theory approach enables the dervaton of tradtonal consumer demand and labor supply functons from utlty maxmzaton. On the other hand, nput demand and output supply functons from proft maxmzaton or cost mnmzaton can be obtaned from the producton theory approach. Applcatons of consumer approach to mport demand analyss are extensve and nclude emprcal models such as the Armngton model (Armngton, 1969), AIDS model (Deaton & Muellbauer, 1980) and Rotterdam model (Thel, 1980). However, mports may not be fully treated as fnal goods (Lee, Seale, & Jerwryapant, 1990; Seale, Sparks, & Buxton, 1992). Ths s because most mported goods are ntermedate commodtes whch requre certan processng or repackagng before they are fnally dstrbuted to the consumer (Washngton & Klmer, 2002; Muhammad, Jones, & Hahn, 2007). In such cases, a producton approach s better able to estmate mport demand. However, n the case of fresh fruts and vegetables n ths study, there s very lttle valueadded processng nvolved, and the fresh produce s justfably classfed as fnal goods, mplyng that the AIDS model s approprate.

8 Followng Deaton and Muellbauer (1980; 1993), the AIDS model can be expressed as follows: w = α + γ j ln p j + β ln( Y / P*) + u (1) where w s the expendture share of good, y s total expendture, u denotes the dsturbance term, and P * s a prce ndex defned as, n n n 1 ln P* = α + α ln p + γ j ln p ln p 0 j (2) 2 = 1 = 1 j= 1 Based on consumer demand theory, addng up and homogenety condtons hold f α = 1 and γ j = 0 whle symmetry restrctons requre that γ j = γ j. The ntercept j α represents the subsstence consumpton of commodty, and the β s represent the change n commodty s expendture share wth respect to change n real ncome, ceters parbus. Commodty f β > 0 and a necessty f β < 0. The prce coeffcents, γ j, represent the change n the th budget share wth respect to a percentage change n the j th prce, wth real expendtures held constant. Ifγ > 0, goods and j are consdered substtutes, whereas, fγ < 0, they are consdered complementary goods. j The nonlnear prce ndex P * n equaton (2) poses some emprcal challenges. To mtgate the possble estmaton dffcultes, we adopt the geometrc weghted average ndex proposed by Moschn (1995): ln P* 0 = w ln p j, (3) where 0 w s the mean budget share for commodty j.

9 The Marshallan (uncompensated) demand elastctes from the lnearzed model are calculated as follows:, e j γ j w j = δ j β, where δ j = 1 f = j and δ j = 0 for j (prce elastcty), w w j β η = + 1 (expendture elastcty) (4) w The Hcksan (compensated) prce elastctes can be calculated from the Marshallan elastctes as, ε = e + η w. (5) j j j The AIDS model presented thus far assumes that consumpton s always n equlbrum, whch s not always true, especally wth tme seres data. In realty, habt persstence, adjustment costs, mperfect nformaton and ncorrect expectatons nterfere wth nstant expendture adjustment to prces and ncome changes. A recommended practce s to undertake statonarty and contegraton tests when workng wth tme seres data to determne f the data are nonstatonary and/or contegrated. Nonstatonarty n varables and the presence of contegraton n the equatons would jeopardze the consstency of the parameters. In such cases, a dynamc verson of the AIDS model s more sutable. We tested for statonarty and contegraton n our prces, expendtures shares and real expendture usng the Phlps Perron test. We then modfed the AIDS model to an Error Correcton Model verson (ECM-AIDS), followng Banerjee, Dolado, & Smth (1986), Karaganns, Katrands, & Velentzas (2000), and Kremers, Ercsson, & Dolado (1992) as follows:

10 Δw γ jδ p j + β Δ ln( y / P + λut + = ϕ Δwt 1 + ln *) 1 ν (5) j n where Δ denotes the dfference operator and u t 1 are the lagged estmated resduals from the contegraton equatons. The term φ s the devaton of actual budget shares n the prevous perod, w t 1. The ECM-AIDS s then estmated by terated seemngly unrelated regresson (ISUR). Addng-up and symmetry condtons are expected to hold, just as n the AIDS model. Data The selected U.S. tropcal fresh frut mports ncluded bananas, pneapples, papayas, mangoes/guavas, grapes, avocados, and all other mported U.S. fresh fruts. To capture the effects of mported grapes on U.S. fresh grapes, domestc fresh grapes supply was ncluded n the analyss. Although the U.S. supples some avocados and pneapples, manly from Calforna and Hawa, they were excluded n ths analyss because ther contrbuton were relatvely unmportant and the prce data were unavalable. The data utlzed n ths study were monthly quanttes, Cost, Insurance, and Freght (CIF) mport values from USDA s Foregn Agrcultural Servce, measured n metrc tonnes and thousand U.S. dollars, respectvely. The data sample ranged from January 1989 through December CIF mport values were preferred to avod the excluson of shppng costs of tropcal fresh fruts. Monthly per-unt values were calculated by dvdng the monthly mport values by quanttes for all the selected tropcal fresh mports and were used as proxes for mport prces. For U.S. grapes, monthly shpments of fresh grapes were sourced from USDA s Agrcultural Marketng Servce to

11 serve as a proxy for U.S. domestc quanttes of fresh grapes. The prces of U.S. grapes were obtaned from the Economc Research Servce Fruts and Nuts Yearbooks. Monthly expendtures were calculated from the quanttes and prces, followng whch the total expendture was derved by addng up all the ndvdual frut group expendtures. For each fresh frut, expendture shares were derved by dvdng the total outlay by the ndvdual fresh frut expendture. A dummy varable was also ntroduced to capture the effect of NAFTA trade polces snce 1995 when NAFTA was enacted. A summary of the average monthly quanttes, prces, expendtures, and budget shares s shown n Table 1. The graph n Fgure 2 presents the evoluton of aggregate cereal budget shares of the selected tropcal fresh fruts. Although the graphs showed the presence of seasonalty and trends n the expendture shares, formal unt tests and contegraton tests were needed to confrm the presence of unt roots n the data seres. Results The Phllps-Perron unt and contegraton tests shown n Table 2 demonstrated that the prce seres, real expendtures, and budget shares were nonstatonary at the 10% sgnfcance level. Contegraton was present n all the fresh frut expendture share equatons at the 10% sgnfcance level. All the unt root and contegraton statstc values were smaller than the crtcal values of and -4.42, respectvely, thus justfyng the applcaton of an error correcton specfcaton of the model. Snce contegraton tests are known to have a low power, we adopted Banerjee, Dolado, & Smth (1986) and Kremers, Ercson, & Dolado (1992) approach to test for contegraton. The procedure nvolved the estmaton of an error correcton model,

12 followed by a test for the sgnfcance of the error correcton term. If the null hypothess s not rejected, then the seres are not contegrated. Ths step ncludes the estmaton of the dynamc AIDS model usng TSP 5.0 by the ISUR technque. Addng-up, homogenety and symmetry condtons were mposed to conform to demand theory. To avod sngularty problems, the equaton for papaya expendture shares was dropped from estmaton and ts parameters derved from economc theory restrctons. Results of the ECM-AIDS model are presented n Table 3. As shown, the error correctng coeffcent s negatve and sgnfcant at the 1% level n all the expendture share equatons, whch supports the Phllps-Perron test for contegraton. Table 3 also presents the estmated coeffcents of the ECM AIDS model. Estmated ECM expendture parameters for grapes and other fresh frut mports were postve, mplyng that these two fresh frut groups were consdered luxures. Whle ths fndng was expected, we dd not expect that mangoes/guavas, papaya, and avocado would appear to be necesstes. NAFTA trade polcy seems not to be mportant to U.S. tropcal fresh frut expendture shares, perhaps reflectng lttle or no change n tarff condtons for non-compettve (tropcal) commodtes. The estmated short-run (monthly) elastctes of demand for the tropcal fresh fruts analyzed were calculated at sample means. Uncompensated elastctes of demand are presented n Table 4, whle the compensated demand and expendture elastctes are shown n Table 5. In the nterest of brevty, however, we restrct our dscusson to the compensated demand and expendture elastctes n Table 5. All the expendture elastctes of demand were postve and sgnfcant at the 0.01 level, confrmng that the expendture shares for mported fresh fruts were senstve to

13 changes n ncome. The expendture elastctes for fresh grapes mports and other U.S. fresh frut mports were greater than one ( and for mported fresh grapes and other fresh fruts respectvely), thus mplyng that they were luxury goods. Bananas are staple commodtes n U.S. consumpton, manly consumed for breakfast and desert. It was, therefore, not surprsng that the short-run expendture elastcty for bananas was The short-run expendture elastctes for mported fresh pneapples and papaya were and , respectvely, mplyng that these two exotc fresh fruts were also qute nelastc, thus contrary to our expectatons. Avocado and U.S. fresh grapes expendture elastctes were also less than untary, and , respectvely. Own-prce elastctes of demand for all eght mported fresh fruts had the expected negatve sgn and were sgnfcant at the 0.01 and 0.05 levels, confrmng that they were consdered normal goods. Own-prce elastctes range from for bananas to for mangoes/guavas. Fresh papaya and fresh mango/guava mport expendture shares were shown to be prce elastc, whch was expected, gven ther exotc nature. Own-prce elastctes of demand for papaya and mango/guavas were and , respectvely, mplyng that the short-run expendture shares ncreased by about 1.32% and 1.39%, respectvely, gven a 1% percent decrease n the respectve prces. The magntude of own-prce elastcty of mported banana was qute small compared to the reported by You, Epperson, & Huang (1996) and by Huang & Ln (1987). Ths very nelastc response was, however, very lkely to be related to the monthly tme perod for changes n the demand specfcaton of the ECM-AIDS. The prce of fresh pneapple mports was also qute nelastc, at , mplyng that f the prce of mported fresh pneapple ncreased by 10%, the expendture shares of

14 mported fresh pneapples would decrease by only 3.9%. Smlarly, the own-prce elastctes of demand for other U.S. mported fresh frut and U.S. fresh grapes were also nelastc wthn ths short tme adjustng perod; and , respectvely. Ths fndng was counter to our expectatons for the demand for exotc fresh fruts to be very senstve to own prces. Fresh grape mports and fresh avocado, on the other hand, were only slghtly prce nelastc at and Table 5 also showed the estmated cross-prce elastctes of demand, whch were mportant n determnng the short-run demand relatonshps of the varous mported fresh fruts. The fruts that appeared to be complementary goods ncluded bananas and fresh grapes mports, avocados and U.S. fresh grapes, and avocados and other fresh frut mports. Ther respectve cross-prce elastctes were negatve and sgnfcant at the 10% levels or better. Fresh avocado mports appeared to be sgnfcant substtutes wth bananas, papayas, mangoes/guavas, and mported fresh grapes, as ther respectve cross-prce elastctes of demand were postve and sgnfcant. Although mported fresh grapes were beleved to complement domestc supply of fresh grapes durng wnter months, our results showed the contrary. The demand for mported fresh grape and U.S. fresh grapes mply that the two were sgnfcant substtutes. Fresh grape mport expendtures ncreased by 1.9%, f the prces of U.S. domestc grapes ncreased by 10%. Ths shortrun fndng could be attrbuted to the overlappng of grapes seasons over the years. Other sgnfcant fresh frut substtutes ncluded bananas and mangoes/guavas, papaya and pneapples, and fresh grapes mports and mangoes/guavas.

15 Conclusons Demand for tropcal fresh fruts was analyzed usng a dynamc, error correcton Almost Ideal Demand System model to determne relatonshps among the leadng U.S. fresh frut mports. The fruts chosen for the study ncluded mported fresh bananas, pneapples, papaya, mangoes/guavas, grapes, avocados, and other mported fresh frut, as well as domestc table grapes. Unt root and contegraton tests results showed that all the seres were nonstatonary and contegrated, hence justfyng an error correcton specfcaton of the AIDS model. The ncepton of NAFTA does not appear to nfluence trade polcy for tropcal fresh frut mports, perhaps due to the fact that, wth an excepton of mangoes, these commodtes orgnated largely from non-nafta countres. All the fresh fruts expendture shares were sgnfcant and postvely responded to real ncome/expendtures, renforcng the ndustry s perceptons that consumer ncomes were a major determnant of U.S. fresh frut mports and that all the fresh fruts were normal goods. Fresh grape mports and other fresh frut mports were found to be luxury commodtes, whle bananas were shown to be staple goods. Among the mported fresh fruts, papayas and mangoes/guavas were shown to be own-prce elastc, whle bananas, pneapples, other frut mports and U.S. grapes were prce nelastc n the short run. These fndngs also showed that mported fresh grape were sgnfcant substtutes to domestc grapes, although they were purportedly meant to complement domestc supply seasonally. Avocados appear to be substtutes wth bananas, papaya, mangoes/guavas, and grape mports. In other parngs, bananas and

16 mangoes/guavas, pneapples and papaya, and mangoes/guavas and grape mports also demonstrate substtute relatonshps. On the other hand, complementary fresh frut parngs ncluded bananas and grape mports, avocado and other frut mports and U.S. grapes. Although some of the fndngs dffered from our a pror expectatons, the study provded dynamc, short-run elastcty estmates for U.S. fresh frut mports for many tropcal fruts, such as mangoes, papaya, avocados and pneapples, whch were unavalable n the exstng lterature.

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20 Table 1. Monthly Average Quanttes, Expendtures, Prces, and Expendture Shares of U.S. Tropcal Fresh Frut Imports, 1989:1 2008:12. Monthly Average Tropcal Fresh Frut Quantty (MT) Prce (US$/MT) Expendtures (US$ 1000) Shares Banana Imports Pneapple Imports Papaya Imports Mango/Guava Imports Grapes Imports Avocado Imports All Other Frut Imports U.S. Grapes

21 Table 2. Unt root and Contegraton Tests of Monthly U.S. Domestc and Import Demand for Tropcal Fresh Fruts, Fresh Frut Share Label Unt Root Phllps Perron Test Contegraton Bananas S Pneapple S Papaya S Mango/Guavas S Grapes S Avocados S Other Fruts S U.S. Grapes S Log Prces Bananas LNP Pneapple LNP Papaya LNP Mango/Guavas LNP Grapes LNP Avocados LNP Other Fruts LNP U.S. Grapes LNP Real Expendture (log) LN E Crtcal values at 10% are and for unt root and contegraton tests, respectvely.

22 Table 3. Estmated Coeffcents of ECM-LA/AIDS for U.S. Domestc and Imported Fresh Fruts, Δ s t 1 BANANA IM Δ s *** PINEAP IM Δ s * PAPAYA IM Δ s *** MANGO /GUAVA IM Δ s *** GRAPES IM Δ s *** AVOCAD IM Δ s *** OTHER FRUITS IM Δ s *** GRAPES US Δ s *** Δ ln p *** Δ ln p * *** Δ ln p * *** Δ ln p Δ ln p *** Δ ln p Δ ln p *** Δ ln p *** Δ ln E *** *** ut Nafta *** ** *** *** *** *** * ** *** *** *** *** * *** ** *** *** *** *** *** *** *** *** *** *** * *** *** *** Notes: Sngle, double, and trple astersks (*, **, ***) denote statstcal sgnfcance at 10%, 5%, and 1. Below the estmated parameters, are the respectve standard errors. IM= Imports. US=U.S. domestc supply.

23 Table 4. Uncompensated Elastctes of Demand for ECM-LA/AIDS for U.S. domestc and Imported Tropcal Fresh Fruts, BANANA IM PINEAP IM PAPAYA IM MANGO /GUAVA IM GRAPES IM AVOCADO IM OTHER FRUITS IM GRAPES US REAL Expendture BANANA IM *** ** *** *** PINEAPPLE IM *** * ** ** *** PAPAYA IM ** *** ** *** MANGO /GUAVA IM ** *** *** *** * GRAPES IM *** *** *** *** *** *** *** *** *** AVOCADO IM ** ** *** *** *** *** *** OTHER FRUITS IM GRAPES US *** * *** *** *** *** *** *** *** *** *** Notes: Sngle, double, and trple astersks (*, **, ***) denote statstcal sgnfcance at 10%, 5%, and 1%. Below the estmated elastctes, are the respectve standard errors. IM= Imports. US=U.S. domestc supply.

24 Table 5. Expendture and Compensated Elastctes for ECM-LA/AIDS for U.S. Domestc and Imported Tropcal Fresh Fruts, BANANA IM PINEAP IM PAPAYA IM MANGO /GUAVA IM BANANA IM ** *** GRAPES REAL GRAPES IM AVOCAD IM OTHER FRUITS IM US Expendture *** * ** *** PINEAPPLE IM PAPAYA IM *** ** ** *** *** ** *** *** *** MANGO / GUAVA IM *** *** *** *** * GRAPES IM *** *** *** ** *** ** *** AVOCADO IM * ** ** *** ** *** * ** *** OTHER FRUITS IM GRAPES US ** * *** ** * ** *** ** *** *** *** Notes: Sngle, double, and trple astersks (*, **, ***) denote statstcal sgnfcance at 10%, 5%, and 1%. Below the estmated elastctes, are the respectve standard errors. IM= Imports. US=U.S. domestc supply.

25 Fgure 1. Import value growth of nontradtonal fresh frut, Source: USDA, ERS, 2007