Using Elasticities from an Almost Ideal Demand System? Watch Out for Group Expenditure!

Group expenditure has often been treated as exogenous when estimating demand parameters for a group of commodities with an almost ideal demand system. Researchers draw demand elasticities from past literature to use in their own analysis, but elasticities contingent on exogenous group expenditure may be inappropriate. Here, the approach is considered in the case of Japanese meat demand with a simple equation added to estimate group expenditures. The results show that elasticities should be revised and that a group expenditure equation is not a panacea as it may result in the violation of theoretical restrictions, such as symmetry.     

Wholesale Demand for Fish in Greece

Inverse demand systems explain price variations as functions of quantity variations. This article presents a dynamic inverse almost ideal demand system (AIDS) model based on recent developments on cointegration techniques and error correction model. The case of fish landed at Greek seaports appears to suit this model well. The results indicate that the underlying distance function is homothetic whereas the own-quantity flexibilities suggest that the responses of price to own-quantity changes are inelastic. Finally, the results of cross-quantity uncompensated flexibilities suggest that the substitution possibilities among fish grades are rather limited. The Allais interaction intensities verified the substitutability among fish grades as well.     

中国锯材进口需求弹性分析

基于俄罗斯等国限制中国锯材的出口以及天然林保护工程实施的现实情况,分析中国主要锯材进口国家的相关关系及其对中国锯材进口的影响程度。首先,分析锯材进口需求上升的趋势和中国锯材主要进口国分析,然后分析需求弹性理论基础与LA/AIDS,其次,利用LA/AIDS方法估计与分析中国锯材进口需求弹性,最后,提出建立多元化市场策略、调整中国锯材的进口结构等建议。     

An Almost Ideal Demand System Analysis for Meats with Habit Formation and Structural Change

In this paper, Canadian meat consumption patterns are analyzed using a dynamic version of the almost ideal demand system (AIDS). Structural change in the demand for meats is examined by testing for non-constancy of the parameters of the non-linear system. It is concluded that Canadian meat consumption patterns can be explained by a combination of habit persistence as well as changes in prices, consumer expenditures and tastes. Incorporating the dynamic element of a habit effect in the AIDS model improves the consistency between demand theory and the observed data. The hypothesis of structural change in demand during the late 1970s cannot be rejected. The detected structural shift is related to the intercept terms of the expenditure share equations, suggesting changes in taste in the demand for different meats. Consumption expenditures have shifted from beef to chicken but remained stable for pork; a 6% decline in the expenditure share of beef and a 33% increase in the expenditure share of chicken seem to have been due to this structural shift. Le présent document analyse la consommation de viande au Canada au moyen d'une version dynamique du système de la demande quasi idéale. Les auteurs examinent le change-ment structurel de la demande de viande en vérifiant si les paramètres du système non linéaire sont constants ou non. Ils en concluent que le comportement de la demande de viande au Canada peut s'expliquer à la fois par la persistence des habitudes et par les change-ments observés au niveau des prix, des dépenses des consommateurs et des goûts de ces derniers. L'intégration d'un élément dynamique au modèle, soit l'incidence des habitudes, accroît la cohérence entre la demande théorique et les observations. L'hypothèse que la demande aurait changé vers la fin des années 1970 ne peut être rejetée. La modification structurelle décelée est associée aux coordonnées à l'origine des équations de répartition des dépenses, ce qui suggère des changements de goût en ce qui concerne les différentes viandes. Ainsi, les achats de poulet ont augmenté au détriment du boeuf mais les dépenses sont restées stables pour le porc; on a observé une régression de 6 p. 100 des achats de boeuf et une hausse de 33 p. 100 de la demande de poulet, variation qui semble à l'origine du changement structurel observé.     

Cross Entropy Estimation of the Almost Ideal Demand System for Greek Consumption

Cross entropy is used to estimate the Almost Ideal Demand System for consumption in Greece. The entropy estimates are found to improve upon the SUR estimates. It is recommended that practitioners consider employing entropy based procedures in systems where the data set is small, where there are a large number of parameters, or where the data are deficient.     

Demand for fish in Asia: a cross‐country analysis*

Fish demand patterns in nine Asian countries were investigated using a multistage budgeting framework allowing a disaggregated approach to analysing fish consumption. This paper highlights the heterogeneity of fisheries products in terms of species, sources and cultural responses of consumers, factors that are important in fish demand under the Asian setting. Specifically, fish demand by income groups were compared to determine how the low‐ and high‐income households respond to price and income changes. Results showed that the estimated price and income elasticities of all fish types included in the study were relatively more elastic among the poorer households.     

Testing Symmetry and Homogeneity in the Almost Ideal Demand System with Co‐integrated Data using Fully Modified Estimation and the Bootstrap

Conventional seemingly unrelated estimation of the almost ideal demand system is shown to lead to small sample bias and distortions in the size of a Wald test for symmetry and homogeneity when the data are co‐integrated. A fully modified estimator is developed in an attempt to remedy these problems. It is shown that this estimator reduces the small sample bias but fails to eliminate the size distortion. Bootstrapping is shown to be ineffective as a method of removing small sample bias in both the conventional and fully modified estimators. Bootstrapping is effective, however, as a method of removing size distortion and performs equally well in this respect with both estimators.     

Food Demand in Mexico: An Application of the Amemiya-Tobin Approach to the Estimation of a Censored Food System

The modeling of micro-level food demand patterns requires not only allowing for household heterogeneity, but also addressing the problem of censoring. In this article, we present a variation of the Amemiya-Tobin framework for estimating a censored demand system that allows for household heterogeneity. The unique aspect of our approach is the use of a procedure that ensures the adding up of both latent and observed expenditure shares and also imposes expenditure share nonnegativity. This system is applied to an analysis of food demand based on a random sample of urban Mexican households.     

Demand for Domestic and Imported Table Wine in British Columbia: A Source-differentiated Almost Ideal Demand System Approach

The premium quality wine market in British Columbia has grown substantively over the past decade. However, few empirical studies exist to quantify how consumers have responded to these wines. This paper employs a source-differentiated almost ideal demand system (AIDS) model with time-varying parameters to estimate the demand for premium quality wines using scanner sales data from the British Columbia wine market. The empirical findings reveal that consumers' response to foreign-produced wines differs from that for wine produced locally. It is evident that the expenditure elasticities for British Columbia, European and Rest-of-the-World white wines are larger than those for red wines. The high expenditure elasticities associated with British Columbia white wines may suggest that these wines are associated with higher quality. We reject the hypotheses of block separability and product aggregation. There is no evidence of structural change from the tests employed in this paper.     

An application of cointegration theory in the estimation of the Almost Ideal Demand system for food consumption in Bulgaria

The Almost Ideal Demand system is applied to consumption in Bulgaria. It is argued that the conventional estimation of the Almost Ideal model should be done within the framework of contemporary time series methodology. In this paper, the canonical comtegrating regression procedure of Park is applied. It is argued that the results of the Almost Ideal Demand system that are presented are consistent with both theory and ‘casual’ observation of consumer behaviour in Bulgaria.     

Measurement Error in Recall Surveys and the Relationship between Household Size and Food Demand

Variation in household survey design and implementation is used to obtain evidence of nonrandom measurement error in recall surveys of household expenditure. These surveys, which are used especially in developing countries, appear to have measurement errors in food expenditures and in food budget shares that are correlated with household size. These correlated errors may be part of the explanation for a puzzling pattern of falling food demand with rising household size in poorer countries.     

The Demand for Food Quality in Rural China

Many studies of food demand do not use actual prices but unit values, obtained by dividing expenditures by the quantity consumed. This can bias empirical analyses because unit values are not exogenous market prices; they reflect household food quality choices within each food category. This article develops a framework for assessing the resulting bias in income and price elasticities of demand and applies the framework to data for rural China. Empirical results indicate that households in rural China tend to consume higher-quality food as income increases, with a greater sensitivity to income for basic foods than for luxury foods.     

Demand Elasticities for Fresh Vegetables in the United States

Abstract

Demand elasticities at retail level for eight major fresh vegetables in the United States were estimated with the Almost Ideal Demand System using annual data over the period 1960-1993. Results show that the demand for fresh vegetables was generally inelastic with respect to changes in own prices, and cross-price effects for most fresh vegetables were negligible. Furthermore, the study suggests demands for carrots, cucumbers, lettuce, peppers, and onions were highly elastic with respect to changes in expenditures on fresh vegetables. However, expenditure elasticities for celery and tomatoes were found to be inelastic, while the expenditure elasticity for cabbages was negative but statistically insignificant.     

A Re-Examination of the Demand for Sugar in the United States

This study identifies the factors affecting the per capita consumption of sugar consumed in the United States over the period 1960 through 1991. Important explanatory factors include, for beverage sugar, the price of sugar, the price of substitute sweeteners, and soft drink sales and for nonbeverage sugar, the price of sugar, the price of substitute sweeteners, and disposable personal income. An additional important influence in explaining the behavior of sugar consumption is the introduction of high fructose corn syrup as a strong competitor, especially for sugar used in beverages.     

Induced Innovation in United States Agriculture, 1880–1990: Time Series Tests and an Error Correction Model

An error correction model (ECM) of induced innovation, based on the two–stage CES production function allows direct tests of the inducement hypothesis, which are applied to U.S. data for 1880–1990. The time series properties of the variables include a structural break in 1920, cointegration is established and an ECM constructed, which allows factor substitution to be separated from technological change. Causality tests show that the factor–price ratios and R&D are Granger–prior to the factor–saving biases of technological change. The inducement hypothesis is corroborated, and identified as one factor in the complex development of U.S. agriculture.     

A Meta‐Analysis on the Elasticity of Demand for Pesticides

There is an increasing policy interest in pesticide taxation schemes as a measure to reduce harmful effects of pesticide use. The effectiveness of such tax depends, however, on the price elasticity of demand for pesticides. Moreover, information on these demand elasticities and their determinants is of crucial relevance for policy‐making and normative modeling approaches. In this article, we present a meta‐analysis based on studies that have estimated pesticide demand elasticities in Europe and North America. Our meta‐analysis reveals that the own‐price elasticities of demand for pesticides are, with a median of ?0.28, significantly smaller than zero, but also significantly larger than ?1, i.e. to be inelastic. We find that the demand for pesticides for special crops is less elastic than that for arable and grassland. In addition, the demand for herbicides is more elastic than for other pesticides. Studies that consider only short‐term horizons and little flexibility for farmers to adjust to price changes generate significantly less elastic pesticide demands. The results also indicate that more recent studies identify lower pesticide price elasticities of demand. Furthermore, we find that peer‐reviewed studies tend to find more inelastic results compared to grey literature.     

Incorporating Generalized Marginal Budget Shares in a Mixed Demand System

This article extends a Rotterdam type of mixed demand system by replacing its constant marginal budget shares with the ones derived from originally defined and specified mixed Engel curves that take a generalized functional form using the Box-Cox transformation. An empirical illustration is given for Japanese demand for fresh and processed fruits and vegetables. The results show that the Rotterdam parameterization of marginal budget shares, which corresponds to those in linear mixed Engel curves, is preferred by the data, and that improper assumptions of the form of mixed Engel curves underlying a mixed demand system can bias its elasticities.     

Effects of Milk Marketing Order Regulation on the Share of Fluid-Grade Milk in the United States

The share of raw milk meeting fluid quality (Grade A) standards in the United States rose steadily through the latter half of the twentieth century, but a shrinking portion of that was used in fluid products. Grade A milk exceeds the quality standards for the manufactured products for which it has been increasingly used. We present an econometric model that exploits regional and temporal variation in policy implementation to identify the effect of marketing orders on the Grade A share of milk. Results support the hypothesis that marketing orders significantly encouraged the growth in the Grade A share of milk.