Competition between Brazil and other exporting countries in the US import market: a new extension of constant-market-shares analysis

Jorge Chami Batista
2008 Applied Economics  
Quite often in Economics, the gain of a player is equal to the sum of all the other players' gains and losses. In particular, when exporters compete for a specific market, the changes in one's share of the market necessarily come at the expense of all the others' share together. If there are more than two exporters, then it is not clear, in principle and in general, how to breakdown one's total change of market shares, ascribing a slice of it to each competing exporter. The objective of this
more » ... er is to propose a general methodology to unravel the above problem, subject to some desirable conditions, and apply it to Brazil's exports of goods to the U.S. comparing the changes between 1992, 1999 and 2004. Assuming that there are more than two exporting countries and that the share of one exporter increases (decreases) from time 0 to time 1, we ask how much of that share rise (fall) can be attributed to each of all the other exporters disputing the market in that period of time. It is assumed that it is unknown how suppliers compete and the characteristics of the products they sell in the market. Therefore, in the same spirit of the constant-marketshares analysis, this methodology is based on a set of identities that result from arbitrary decompositions with no theoretical or empirical foundations. However, the method has economic appeal, as it fulfills some economic desirable properties, and should prove to be useful, as it reveals a clearer and detailed picture of the competitive position of each exporting countries, showing the sources by competitors and products of their gains and losses of market shares. The method also allows a comparison of the export performance between pairs of exporting countries, which may facilitate the test of some hypothesis as to the causes of the gains and losses of market shares of these countries in different destination markets. This paper is divided as follows. In the first section I review the constant-market-shares analysis, including some changes and extensions that have been proposed in the literature. In section 2, I develop my own proposed extension. The traditional constant-market-shares analysis is applied to Brazil's exports to the U.S. in the period between 1992 and 2004 in section 3 and my new extension is applied in section 4. Section 5 sums up the conclusions. (1) The constant-market-shares analysis Constant-market-shares (CMS) analysis has often been applied in studies of export performance and development 1 . The CMS model is based on an identity between the change in the market share of a particular exporting country H in a given market K 2 from 1 Tyszynski (1951) is one of the earliest applications of the method. 2 The analysis may be extended to include several destination markets.
doi:10.1080/00036840600970203 fatcat:yjqiwvd76vbzdcprtfsrvsmvzm