Retail Demand for Meat in Australia: A Utility Theory Approach*

This paper examines Australian retail demand for meat for the post-war period 1949-50 to 1978-79. Several systems of demand equations are estimated, each system (comprising equations for beef, mutton, lamb, pork and chicken) being derived from an underlying static utility function. Model selection procedures are used to determine the preferred specifications). The validity of the utility theory approach is investigated by: testing for the presence of autocorrelation; examining the monotonicity and convexity properties of the utility functions; and comparing the estimated price and expenditure elasticities with those of other Australian studies. Serial correlation does arise as a problem, but other results provide support for the theory.     

Impacts of meat product recalls on consumer demand in the USA

The impact of meat product recall events on consumer demand (beef, pork, poultry, and other consumption goods) in the USA is tested empirically. Beef, pork, and poultry recall indices are constructed from both the Food Safety Inspection Service's meat recall events and from newspaper reports over the period 1982–1998. Following previous product recall studies, recall indices are incorporated as shift variables in consumers’ demand functions. Estimating an absolute price version of the Rotterdam demand model, findings indicate that Food Safety Inspection Service's meat recall events significantly impact demand, and newspaper reports do not. Moreover, although elasticities related to recall events are significant they are small in magnitude relative to price and income effects. Any favourable effects on the demands of meat substitutes for a recall are offset by a more general negative effect on meat demand. The general negative effect indicates a shift out of meat to non-meat consumption goods.     

Asymmetric responses of money demand to oil price shocks in Saudi Arabia: a non-linear ARDL approach

Saudi Arabia is an open oil-based economy with fixed exchange rates; therefore, it has limited monetary policy autonomy. Using non-linear autoregressive distributed lag approach, this article investigates the asymmetric effects of oil price shocks on the demand of money in Saudi Arabia over the period 1990:Q1–2014:Q4. The empirical results show evidence of positive long run but asymmetric effects of oil price shocks on the money demand. In particular, we find that the positive oil price shocks are more important than negative shocks. Therefore, two policy responses can be considered: either sustaining the fixed exchange rate regime and following an economic diversification policy or switching towards a flexible exchange rate regime to achieve price stability. In that case, the existence of a stable money demand function in Saudi Arabia is a necessary precondition for adopting a monetary policy strategy targeted to price stability using instruments like money targeting.     

Effects of health information on Nordic meat and fish demand

Increasing public concerns about health risks associated with dietary intakes of cholesterol are expected to have significant impacts on the demand for foods with high fat content. This paper investigates how information about cholesterol, as measured by two newly constructed indices based on published medical research, has affected the demand for meats (beef, chicken and pork) and fish in the Nordic countries (Denmark, Finland, Norway and Sweden). To compare the effects of information across countries and over time, the demand equations for all the countries are estimated within one system, and a complete set of price and expenditure elasticities is estimated. Our findings suggest that health information has affected consumption in a healthy way in all countries studied except for Denmark. We find positive effects on the demand for chicken in Finland, Norway and Sweden and for fish in Finland and Sweden. A negative effect on the demand for beef in Sweden also is found. First version received: May 2001/Final version received: December 2001 RID="*" ID="*"  The authors would like to thank Wen S. Chern and Bj?rn Sl?en for their assistance in the construction of the health information indices. The suggestions of two anonymous referees have also been of great assistance. The EU (contract FAIRS-CT97-3373) and the Research Council of Norway (grant no. 134018/110) provided financial support for this research.”     

The influence of recession and income strata on consumer demand for protein sources

Though meat products are considered the primary sources of protein in the U.S., people consume a variety of protein sources including meat, fish, eggs, dairy products and beans. This study expands the typical meat demand study by including alternate protein sources. We implement state-space modelling and Bai-Perron tests to examine structural change in U.S. expenditure patterns on protein sources across pre- and post-recessionary periods. Results are integrated into a Time-Varying Almost Ideal Demand System (AIDS) including beef, pork, poultry, fish and seafood, eggs, dairy products, dried beans, and an ‘other meat’ composite. Expenditure elasticities generally become relatively more elastic post-recession for protein sources across all income quintiles, with the largest changes in beef and pork. The lowest income group exhibits the least change in own-price and in expenditure elasticities, likely an indication of already limited flexibility.     

Meeting the demand: An estimation of potential future greenhouse gas emissions from meat production

Current production processes for meat products have been shown to have a significant impact on the environment, accounting for between 15% and 24% of current greenhouse gas emissions. Meat consumption has been increasing at a fantastic rate and is likely to continue to do so into the future. If this demand is to be met, technology used in production in the form of Confined Animal Feeding Operations (CAFOs) will need to be expanded. This paper estimates future meat consumption and discusses the potential aggregate environmental impact of this production if the use of CAFOs is expanded. I first separate meat into beef, chicken and pig products and estimate the elasticities associated with each product in order to forecast the world demand for meat. Using research on the environmental impact of food production in the US, which uses one of the most efficient CAFO processes in the world, I then calculate the total potential greenhouse emissions of this meat production and discuss the impact of these consumption patterns. I find that, under an expanded CAFO system, meat production in the future will still be a large producer of greenhouse gases, accounting for up to 6.3% of current greenhouse gas emissions in 2030.     

Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity

This paper estimates country‐wide and state‐level income and price elasticities of electricity demand in Australia for the period 1999Q1–2013Q2 using the National Electricity Market data and the autoregressive‐distributed lag model. The results suggest that the long‐run income and price elasticities are inelastic and are statistically significant with theoretically consistent signs. The country‐wide income and price elasticities are estimated to be 0.41 and ?0.38, respectively. It is also found that there exists state‐specific heterogeneity in both speed and magnitude of the electricity consumption adjustment in response to changes in income and electricity price. These results have important policy implications, including the need to use state‐specific elasticities in the scenario analysis of the energy pricing policy.     

The US retail demand for fish products: an application of the almost ideal demand system

The main objective is to address the limitations of past US fish demand research through the development of a variation of the almost ideal demand system model for disaggregate fish products at the retail level. Price and expenditure elasticities, as well as elasticities of substitution between fish products and other protein commodities, determined from this work may be used in the context of fisheries management and market development and promotion. Results indicate that with the exception of shellfish, demand for the various fish products is relatively inelastic. Cross-price elasticities are generally moderate while expenditure elasticities are large and positive for fresh fish and shellfish. Demographic effects, especially geographical division, season, race, occupation, age–sex household composition, and price–income interaction, as a proxy for quality, are highly significant variables.     

The demand for paper and paperboard: econometric models for the European Union

Cost minimization theory suggests national demand equations for paper and paperboard in which demand is a negative function of the price of paper and paperboard, and a positive function of gross national product. A dynamic version of this model was estimated with data from European Union countries, for newsprint, printing and writing paper, and other paper and paperboard. Country-by-country equations proved unstable. Pooling the data across countries, with dummy variables to account for fixed country effects, led to well defined short-term and long-term elasticities with respect to price and gross national product. The hypothesis that income and price elasticities were the same across the European Union countries could not be rejected at the 1% significance level, for the three product groups. From 1969 to 1995, most of the growth in demand had been due to the growth in national product, while price increases had only a small negative effect.     

Oil Prices, Terms of Trade Shocks, and Macroeconomic Fluctuations in Saudi Arabia

The article investigates the sources of macroeconomic fluctuations in Saudi Arabia using structural vector autoregression methods and pays particular attention to oil prices and changes in terms of trade. Using a macroeconomic model tailored to the Saudi Arabian economy, the authors identify terms of trade, supply, balance of payments, aggregate demand, and monetary shocks. The results show that the Saudi Arabian price level, real exchange rate, and to a lesser extent output is vulnerable to terms of trade shocks. Moreover, Saudi Arabian terms of trade are driven by output, trade balance, and aggregate demand shocks. To stabilize output and the real exchange rate, Saudi Arabia ought to continue diversifying its production base and aim for a stable nominal oil price. (JEL E32 , Q43 , C22 )     

Microeconometric Analysis of Residential Water Demand

This paper develops a structural model for obtaining price elasticities and evaluating consumer’s response to changes in nonlinear tariffs when only panel data on household consumption are available. The model and the empirical strategy address problems implied by nonlinear tariffs, existence of a fixed cost, and use of limited data, giving rise to a random effects model with a nonlinear individual effect. Results show that the estimated model does well at fitting data and demand is inelastic, although elasticity varies by initial consumption block. Then, I estimate welfare consequences of implementing several demand policies.     

Kalman filter and the demand for cigarettes

kalman filter estimates of price, income and advertising elasticities are presented. An analysis of structural change in the demand for cigarettes in the US for the period 1929–86 is made. Estimated price and income elasticities are generally smaller, and the advertising elasticity larger, than estimates previously found. Cigarette demand is inelastic with respect to price and income, and advertising elasticity is statistically insignificant for the most part. Furthermore, both income and price elasticities decline over time while advertising elasticity tends to rise. Four time periods where structural change has occurred are identified. The health scare reports and the Fairness Doctrine Act have a significant impact on per capita cigarette consumption.     

Alternative demand models for close substitutes

Three specifications of demand systems are compared and applied to U.S. data on beef, pork, chicken, and lamb in 1950–1972.     

Food security in Kenya: Insights from a household food demand model

This paper evaluates the household food security situation in Kenya in terms of access to food. We apply a quadratic almost ideal demand system (QUAIDS) model to nationally representative household survey data from Kenya, and estimate and interpret price and expenditure elasticities as indicators of household sensitivity to market shocks. Our estimation results show positive expenditure elasticities, close to unity, while all compensated and uncompensated own-price elasticities are negative and smaller in magnitude. A complementary welfare analysis shows high compensated variations in the long run, ranging between 34% and 131% across food groups. This suggests that rising relative food costs have led to deterioration of the food security situation in Kenya, and the most severely affected households seem to be those that rely on informal markets and reside in rural areas. To improve food security, targeted income support could be a more effective policy than price support, given the much higher estimated expenditure elasticities.     

Conditional and unconditional food demand elasticities in a dynamic multistage demand system

This paper estimates conditional and unconditional demand elasticities in a three stage analysis of consumer demand for food and non-food items in Greece. A dynamic version of the AIDS model is specified and estimated, and full system misspecification tests applied. Correction formulas for price and expenditure elasticities are used to calculate unconditional elasticities from conditional demand sub-systems. All food items rank as price inelastic. Deviations between the calculated conditional and unconditional price and expenditure elasticities are found to be significant, demonstrating the importance of correcting conditional elasticities before they can be used for policy purposes or welfare analyses.     

Consumption patterns in Sri Lanka: a decomposition analysis

Knowing consumer reaction to changes in prices and income is important in formulating microeconomic policies, such as public utility prices and commodity taxation. This paper analyses the consumption patterns of consumer goods grouped into eight broad commodities in Sri Lanka during the period 1975–2016, using a system-wide framework. The analysis indicates that Sri Lankan consumers allocate more than half of their income to food and nearly four fifths of their income to food, housing, and transport combined. The estimated income and own-price elasticities reveal that food, housing, medical care, and transport are necessities; clothing, durables and recreation are luxuries; and demand for all commodities is price inelastic except for recreation. To investigate the consumption growth pattern, we decomposed the growth in consumption and change in budget shares of the eight commodities into income, relative price, and change in taste. We also simulated per capita consumption expenditure of the eight commodities under various policy scenarios and found that income growth has played a significant role in Sri Lankan consumption patterns.     

The BSE crisis and the price of red meat in the UK

This paper presents estimates of price functions for beef, lamb and pork for the UK economy which allow for the effects of the 1996 BSE crisis. The estimates illustrate the importance of allowing for the joint endogeneity of prices in these markets. This shown that the effects of this crisis had a significant negative effect on the price of beef and a positive and significant effect on the price of lamb. However, there appears to have been little effect on the price of pork.     

European Integration and Production in the French Economy

Effects of greater European integration on the French economy are explored with an aggregate cost function. Input direct price elasticities are inelastic, but greatest (absolute value) for capital and lowest for imports. Cross-price elasticities suggest inputs are substitutes and are higher for domestic inputs than domestic input and imports pairs. As trade restrictions fall, effects on domestic input demand may increase as substitution elasticities rise. Inverse output supply price elasticities indicate domestic input prices are relatively important factors affecting consumption goods prices and import prices more important for investment goods. Thus, import price decreases may stimulate investment and growth. (JEL F14 , O10 , O12 )     

Rationally addicted to drinking and smoking?

When modelling demand for addictive consumption goods, the most widely used framework is the rational addiction model proposed by Becker and Murphy. This paper extends the rational addiction model to include two addictive consumption goods, alcohol and cigarettes, and using aggregate annual time series on sales volumes for the period 1955–1999, estimates the aggregate demand for these goods in Sweden, where OLS estimates are compared to GMM estimates allowing for possible endogeneity of lagged and lead consumption. First, the demand for alcohol and cigarettes are estimated as separate equations and it is found that alcohol demand is quite well described by the rational addiction model while the same is not true for cigarettes. The own-price elasticities are negative, and alcohol demand is more elastic than cigarette demand. The cross-price elasticities are also negative, showing that alcohol and cigarettes are complements. Since consumption of alcohol and cigarettes are probably simultaneous decisions, the demand for these goods is estimated as a system of equations and it is found that alcohol demand is still positively affected by lagged and lead consumption while cigarette demand is not. It is also found that the elasticities obtained are now generally smaller compared to when estimating the equations separately.     

Estimating the household consumption function in Saudi Arabia: an error correction approach

ABSTRACT

We estimate a micro-founded life-cycle consumption model for Saudi Arabia over the period 1970–2017 using error correction model procedures. Dynamic adjustments are significant, and both income and wealth are found to have significant effects, with a long-run marginal propensity to consume out of the income of 0.95 and out of the wealth of 0.06. The sensitivity of consumption to income and wealth, as well as the estimated short-term effects of price and real interest rate, are consistent with the rapidly growing Saudi economy. By capturing the key determinants of the life-cycle model, our approach is useful for the design of macroeconomic policy. We estimate the impact of the recent VAT reform.