Determinants of U.S. Textile and Apparel Import Trade

N _ 1-σ_j

Xi^dj⁼YjPi^-j^σjTi^-j^σjCi^-j^σjEi^-j^σj(∑ Pij ^)-1
i=1

(3)

where X^dij = the quantity of i’s commodity sold in country j; and all other variables are as

previously defined.

The model of trade supply equation is derived from a firm’s profit maximization

procedure in exporting countries. The total profit function of the producing firms is given as

follows:

N

^Πi ⁼∑ PijXij^-WiRi

j=1

(4)

where:

Pij    =     the export price of i’s commodity paid by importing country j;

Xij    =     the amount of i’s commodity imported by country j;

Wi    =      country i’s currency value of a unit of Ri;

Ri    =     the resource input used in the production of the commodity in

country i.

Ri is allocated according to the constant elasticity of transformation (CET) production referred to

as:

N

R = [(∑ XΦ )¹/' ]1"'

i =1

(5)

where δ_i = (1 + γ_i)∕γ_i and γ_i is the CET among exporters.

Furthermore, we assume that income is a limiting factor in producing textile and apparel in the
exporting countries. Therefore, Yi = Wi Ri,, where Yi is the allocated income. Substituting
equation 5 into equation 4 and maximizing the resulting profit function yields the export supply
equation as follows:

N

Xi^sj⁼ YiP^γijⁱ⁽∑  P¹ij^+γi)-1

(6)

i =1