An Econometric Analysis of Exports of Metals: Product Differentiation and Limited Output Capacity

A framework based on product differentiation and limited output capacity is established as a foundation for modelling Norwegian exports of primary metals: Producers of metals are exposed to economic cycles, which lead to changes in the capacity utilisation. When output capacity is available, the price is set by the supply side and export is then given from the demand side. In periods with full capacity utilisation, export is constrained from the supply side and we are not able to identify the demand curve. Using data on capacity utilisation, supply and demand variables in an export-equation are weighted in accordance to the development in economic cycles. We estimate long-run solutions including foreign demand, relative prices and capital stock.