A theoretical foundation for Constant Market Share analysis

descriptionPublicationkeyboard_double_arrow_right Article 01 Jun 1988 English Publisher:Springer Science and Business Media LLCJournal:Empirical Economics, volume 13, pages 65-80 (issn: 0377-7332, eissn: 1435-8921,

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Authors: A. H. Q. M. Merkies; T. van der Meer;

doi: 10.1007/bf01973315

A theoretical foundation for Constant Market Share analysis

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Abstract

Constant Market Share (CMS) analysis is a popular tool for analyzing changes in exports of a country. Nevertheless, its theoretical foundations (and policy relevance) have been questioned. In this paper, we provide such a foundation by relating CMS analysis to a two-stage homothetic demand model. An indication of the empirical relevance of this relationship is given by comparing the CMS analysis with a two-stage Constant Elasticity of Substitution demand model applied to 1972–1976 data of the Economic and Social Commission for Asia and the Pacific (ESCAP).

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