1. Given that the objective of this paper is to decompose the growth in unit values of U.S. pork imports into true price changes and product mix/country mix import composition changes, the methodology outlined in Aw and Roberts (1986, 1988) is followed. Unlike de Melo and Winters (1993), who analyzed the effects of a policy instrument on the targeted country's exports in restricted and unrestricted market, we limit our analysis of the targeted exporter (Canada) to the restricted market (United States). This decision was motivated by the following facts: (1) Canada's pork exports to the U.S. make up over 90% of its total pork exports, and (2) Canada's exports to Japan are subject to very tight contract specifications regarding quality that leave very little room for quality variations.
2. The economic theory of index numbers: a survey
3. Bark and de Melo (1987) investigated the potential for quality downgrading from a different perspective. They demonstrate that a seemingly perverse quality mix response is possible if exporting firms have goals other than profit maximization. However, minimizing foreign exchange losses is not likely to be as compelling a goal for firms as profit maximization in the case of the Canadian pork industry.