The Italian Demand for Imported Virgin Olive Oil: A Threshold Almost Ideal Demand System Approach

This paper analyses the import demand for virgin olive oil in Italy, which concentrates more than 80% of European Union (EU) imports. More precisely, it aims at determining the relative position of Mediterranean EU and non-EU countries exports in the Italian market and their degree of substitutability or complementarities. The methodology used is based on the specification of a Threshold Almost Ideal Demand System (TAIDS) in which special attention has been paid to the stochastic properties of the series involved. In an empirical context, the paper aims at providing a set of import demand elasticities that can be useful in trade policies. Results point to Spain as the leader in the Italian virgin olive oil market. It is expected that this position will be maintained in the future. Greece has improved its relative position after its accession into the EU. However, imports coming from Greece are highly dependent on the situation in Spain. Tunisia has good potential for future exports development as a consequence of new perspectives of trade liberalisation taking into account its relative position in the Italian market, in spite of its current exports constraints due to existing quotas.

Keywords: Virgin olive oil, Italy, elasticities, imports, TAIDS.