IMPORT PRICE UNCERTAINTY AND THE DISTRIBUTION OF INCOME

In this paper we estimate oil and nonoil import demand functions for t he United States under the assumption that import prices are uncertain . Both import demand functions are formally derived from an expected u tility maximization problem, treating imports as inputs to the technol ogy. The model allows us to test for risk aversion and to assess the i mpact of uncertainty on the volume of imports, gross output, and the d istribution of income. We find that uncertainty leads to a reduction i n welfare, imports, and gross output. Moreover, it hurts labor relativ ely much more than capital. The Impact of uncertainty, however, is fou nd to be quite small.