Analysis of demand for cod in EU Mainland. An investigation of the demand for different product forms of cod

Abstract

This study is a demand analysis for the European Union mainland’s import of the different product forms of cod. A system of demand equations are specified with a Linearized Almost Ideal Demand System ( LA-AIDS) to analyze the demand for fresh, frozen, clip, salt and dried cod using a data set from 1988-2014. The time series properties are explored and found to be non-stationary but they cointegrate. To avoid the problem of spurious results due to non-stationarity the variables have been written in first difference form. The competition between these product forms has received little attention in the literature. There could be some important substitution effects between the commodities. All the different product forms considered come from the same raw material, cod. The processing industry has the opportunity to produce all of the different product forms under consideration: fresh, frozen, salt, clip and dried cod. It is important for this industry to enhance its knowledge about the demand for these different product forms. Harmonic variables are included in the model to account for seasonal fluctuations. The result show that almost all of the product forms are substitutes with each other except for fresh and dried cod, which are complements. Papers that investigate the different product forms of cod are either rare or non-existent. Hence, this paper should provide a unique insight into on how the different product forms of cod operate in the European market.