Analysis of Japanese Beef Imports: Exploring Source and Primal Differentiation and Their Implications for Tariff Liberalisation

ABSTRACT Import demand and trade studies often rely on aggregate Harmonised System data, which could result in aggregation bias and erroneous policy inference. We examine the demand for imported beef in Japan using more detailed trade data that accounts for source (e.g., Australia, United States) and primal cut (e.g., chuck, brisket, loin). The data allow us to address key questions: Are source‐specific preferences conditional on product characteristics and vice versa? Do preferences, as measured by estimates of habit formation, expenditure allocation and own‐price responsiveness, significantly differ when product characteristics are ignored? When assessing the gains from tariff liberalisation, are welfare estimates biased by the level of product differentiation assumed for analysis? Including both source and primal cut in the modelling framework enhance the analysis, leading to a better understanding of Japanese import demand. Results indicate that source‐based preferences are influenced by the primal cut and vice versa. However, elasticity estimates are not significantly different across models in most instances, particularly when source is considered. Additionally, the trade policy analysis yields comparable welfare outcomes. In this instance, more aggregated data does not cause significant issues for policy analysis. This is good news for larger scale analysis limited to Harmonised System data.