An econometric analysis of the U.S. cotton, man-made fibers, and textile sectors



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Texas Tech University


The U.S. cotton, man-made fibers (MMF), and textile sectors constitute an integrated complex employing about 2.5-3 million of the U.S. total labor force. The textile sector obtains its raw fibers from the cotton and MMF sectors. Thus, competition exists between the raw fiber sectors for their shares of total mill consumption of fibers. In addition to this competition, there has been an increase in textile imports since the 1960s.

The three sectors are commonly affected by a number of factors. There is instability in the sectors brought about mostly by the inter-linkages among them. Thus, any instability in one sector impacts the others. There is a need to know the impacts of changes in prices, stocks, and textile imports on the demand and supply of U.S. cotton, MMF, and textiles in both the domestic and export markets. There is a lack of understanding of the impacts within and among the three sectors which justifies undertaking this study.

An integrated econometric model of 20 simultaneous equations encompassing relevant variables in the U.S. cotton, MMF, and textile sectors was developed for the study. The simultaneous equations model was estimated using the three stage least squares (3SLS) technique. A number of simulation experiments were conducted to investigate the effect of changes in government payments, MMF and domestic cotton production, and projections made for the endogenous variables of the system for the period 1985-1994.

Mill consumption of U.S. cotton and MMF was found responsive to changes in the domestic producer price of textile products. Demands for domestic and foreign textiles were price elastic and price inelastic, respectively, while domestic mill demands for U.S. cotton and MMF were both price inelastic. Importation of foreign textiles was significantly influenced by domestic prices of U.S. produced textiles. Thus, employment impacts in the domestic textile industry are influenced more by domestic conditions and/or factors as opposed to foreign textile imports. Domestic mill consumption of U.S. cotton and domestic consumption of U.S. produced textiles were income inelastic while consumption of imported textile was income elastic. Simulated projections assuming reduced growth in government spending on cotton programs and stable MMF production indicate that mill and farm prices of U.S. cotton trend upwards until 1990 in at least two scenarios. In these scenarios cotton producers would benefit from higher prices and government costs of cotton programs would decrease, other things constant.



Textile industry -- Econometric models, Synthetic fibers industry -- Econometric models, Cotton trade -- Econometric models