Advertising Expenditures and the Consumption of Alcoholic Beverages

The theory of consumer behavior is applied to the estimation of a demand svstem. Monthly data on alcoholic beverages (beer, wine, liquor, soft dhnks) from the province of Ontario in Canada are analyzed. Before estimating the linear approximate almost ideal demand system (LA/AIDS), unit root and cointegration tests are implemented. Budget shares, per capita advertising expenditures, real total expenditure, prices and per capita consumption are found to be non-stationary. The budget share, the advertising expenditures, the prices and the real total expenditure are cointegrated for each beverage. Own and cross-price elasticities, income elasticities and own and cross-advertising elasticities are calculated from the estimated or the demand system. Based on own-price elasticities and income elasticities, alcohol consumption is consistent with the law of demand and the products analyzed are normal goods. The estimation of income and advertising effects is important for analyzing the need for, and the effectiveness of, potential control policies. The advertising elasticities are small but statistically significant. This suggests that advertising may promote alcoholic beverage consumption. The estimated inelastic demands for beer and wine suggest that the primary purpose of high excise taxes levied by the Federal and Provincial governments is to raise government revenues and not to discourage consumption.     

An Econometric Analysis of Total (Domestic) and Import Demand for Beef in Hong Kong

This paper presents an applied econometric analysis of total (domestic and import) demand for beef in Hong Kong for the period 1970 to 1988. The estimates are in logarithmic form and provide elasticity estimates for beef demand (domestic and import) in Hong Kong. Variables in the estimated domestic demand models (per capita and aggregate) include own price, prices of a substitute (pork) and a complement (rice) and income. Variables in the estimated import demand model include demand side variables (price of beef, price of pork, price of rice and income) and the price of imported live cattle as a supply shifting variable. The elasticities were inelastic for the domestic demand models while most of those for the import demand model were elastic.     

Changing food consumption patterns in rural and urban Vietnam: Implications for a future food supply system

Rapid income growth and urbanisation could significantly change the composition of the food basket in many emerging economies. This study estimates a demand system, including 15 major food items in Vietnam, with multiyear household survey data. We find a large variation in the estimated price elasticities (–0.05 to –0.88) and expenditure elasticities (–0.16 to 2.56). Food types, urban status and income groups can explain this variation. We also find that the staple food, rice, is already an inferior good for rich urban households in Vietnam. Moreover, food preferences are evolving away from rice but towards animal proteins (fish, pork, chicken, eggs and milk), fruits and vegetables, irrespective of urban status and income groups. As the Vietnam economy continues to grow with a doubling of gross domestic product (GDP) in the next decade, per capita rice consumption in both urban and rural areas and across different income groups will continue to decline, whereas demand for other high‐value products will rise. Thus, government policy should focus on encouraging demand‐oriented food production. In addition, crop diversification at the farm level needs to improve substantially to meet the rising demand for these food products due to income growth and urbanisation.     

Food Import Demand in the Czech Republic

This paper provides an overview of Czech food import demand in the transition period of the 1990s. It provides econometric estimates of own‐ and cross‐price elasticities as well as group expenditure elasticities of Czech import demand for sixteen lower level and four upper level food groups. Based on the Hausman test for endogeneity, which supported the hypothesis that Czech import prices were exogenously determined outside of the Czech economy, we estimated five demand models as direct‐demand systems of the AIDS type. The econometric estimation of elasticities used bimonthly data from March 1993 to August 1997.     

Growth in horticultural trade: Japan's market for developing countries

This paper explores possibilities and opportunities of expansion of horticultural exports from developing countries through an investigation on a rapidly growing market, Japan, as an example among major promising markets. In this paper six horticultural commodities are selected to analyze, emphasizing on exports from developing countries. Observations on Japan's horticultural imports make us presume that consumers differentiate products by place of production. Therefore, import behavior is considered in a two-stage budgeting procedure. The second-stage demands for imports from different sources are specified in an almost ideal demand system (AIDS) model and estimated statistically as well as the first-stage import demand equations. The estimated second-stage AIDS equations show that the magnitude of own-price coefficients varies with the source of imports and so does that of expenditure coefficients. Therefore, the characteristics of import demand on a commodity basis, which are captured by the estimates of the first-stage import demand equations, are not equally transmitted to the demand for imports by source in each commodity. The estimated coefficients of the first-stage import demand and the second-stage AIDS equations were combined to obtain the total effects of price and income changes on imports by source. The calculated own-price elasticities are greater than one in absolute value in ten of the 15 cases and so are the calculated income elasticities in twelve cases. The large elasticities promise suppliers that they benefit from Japan's income growth and that they increase their earnings if they can reduce the price by lowering their costs. However, factors in non-price competition also play import roles in the import growth. In this paper, the importance of sales promotions by exporters and preshipment inspections was indicated in the cases of mangoes and cut flowers. Other factors such as market structure and public infrastructure for post-harvest activities were also discussed.     

Demand for cereal grains in Asia: the effect of urbanization

This paper analyzes the effects of urbanization on demand for cereal grains – rice, wheat, and coarse grains – in nine Asian countries. A complete demand system (Almost Ideal Demand System in linear form) is estimated in two stages based on aggregate time series data from 1960 to 1988. In the high-income countries, i.e. Japan and South Korea, urbanization was observed to significantly reduce demand for cereal grains. In the lower-income countries, demand for cereal grains cither increased or remained the same with urbanization. Among cereal grains, urbanization has had negative effects on demand for rice and coarse grains, but consistently positive effects on demand for wheat. Only Japan and Thailand among the countries studied have negative income elasticities of demand for total cereal grains and for rice in particular. Hence, rice remains a necessity and a normal good in most Asian countries. Previous estimates of income elasticities of rice based on time-series aggregate data tend to be lower than those based on cross-section household level data. When urbanization is explicitly specified in the demand model, the estimates of income elasticities from time-series data turn out to be consistent with those from cross-section data.     

Estimates of Food Demand Elasticities for Great Britain: 1972–1994

This paper reports the results of the estimation of Almost Ideal Demand Systems (AIDS) for UK food demand using time series data from the National Food Survey. A Bayesian approach is used to impose curvature restrictions in the model. The aim is to obtain estimates of Hicksian, Marshallian and expenditure demand elasticities for UK food which are fully consistent with static optimisation by consumers. Overall, the results concur with expectations as aggregate food demand is both price and income inelastic and individual food categories are mostly price and income inelastic. The notable exception being meat, specifically pork, beef and chicken.     

Consumers' willingness to pay for food quality - The case of eggs

The aim of this paper is to introduce an approach to estimating the marginal willingness to pay (WTP) for food quality and safety using data on actual consumer purchases. Marginal WTP for specific food product varieties can be derived from estimated demand functions by inverting the relations, thereby expressing the prices consumers are willing to pay as functions of quantity demanded. The task addressed in the paper is isolation of the WTP for quality attributes embedded in the varieties. Two models based on the AIDS-specification are proposed and discussed. To illustrate the applicability of the models, the case of five varieties of eggs is presented. It is found that Danish consumers are willing to pay a relatively high premium for improved animal welfare and organic production methods and somewhat less for food safety.     

Analysis of food demand in Vietnam and short‐term impacts of market shocks on quantity and calorie consumption

A complete demand system for Vietnam was estimated using household survey data. Results showed that demand for rice with respect to prices and expenditure is relatively inelastic compared to other foods. Demand for food in general tends to be less elastic at higher levels of income and for urban households. In the short term, a market shock such as a 10% decrease in income or a 30% increase in rice prices forces households to spend a larger portion of their expenditure on rice at the expense of other foods. Low‐income households face a higher risk of undernourishment as their daily calorie intake is more negatively affected by the shocks than high‐income households. The results suggest the importance of policies that provide necessary safety net programs for the poor.     

SUPPLY RESPONSIVENESS OF RICE FARMERS IN LAGUNA,PHILIPPINES

The supply response and input demand by farmers using modern rice technology in Laguna, Philippines were estimated using profit function analysis. The results indicate that farmers do maximise short-term profits and respond to price changes efficiently. The supply elasticity of rice with respect to its own price was approximately unity. Changes in real wages were estimated to have a greater impact on rice profit and supplies than changes in the real prices of mechanised land preparation, fertiliser or pesticides. Production elasticities derived from the profit function were consistent with those estimated directly from the underlying production function.     

Lithuania's food demand during economic transition

The linear approximate version of the almost ideal demand system (LA‐AIDS) model is estimated using data from the Lithuanian household budget survey (HBS) covering the period from July 1992 to December 1994. Price and real expenditure elasticities for 12 food groups were estimated based on the estimated coefficients of the model. Very little or nothing is known about the demand parameters of Lithuania and other former socialist countries, so the results are of intrinsic interest. Estimated expenditure elasticities were positive and statistically significant for all food groups, while all own‐price elasticities were negative and statistically significant, except for that of eggs which was insignificant. Results suggest that Lithuanian household consumption did respond to price and real income changes during their transition to a market‐oriented economy.     

An Evaluation of Indian Government Rice Policy in Tamil Nadu

The Indian government procures rice from wholesalers or producers at a price below the market price and then distributes it to low-income consumers at a subsidized price. This paper uses a simulataneous equations econometric model to evaluate the effects of this policy on supply/demand of rice in the state of Tamil Nadu, between 1956 and 1985. Results show that production is more responsive to power for irrigation and fertilizer prices than to output prices. Because supply is inelastic, producers bear the burden of the ‘tax’ imposed by procurement even though rice is procured from the wholesaler. Rice distributed by the government displaces rice demanded in the open market, and thus the government distribution of rice has not increased the total consumption of rice.     

Least-cost cheap-food policies: some implications of international food aid

Many low-income countries pursue cheap-food policies in which consumers pay subsidized prices for bread, rice and other staples. This paper addresses the issue of why different governments select different food subsidy policies, using multiple instruments rather than a simple across-the-board subsidy to provide consumers with access to cheap food. It examines the optimal structure of cheap-food policies in the context of a partial equilibrium model in which the country may he large in trade, and is able to combine import subsidies or tariffs, and output taxes or subsidies, to transfer income to consumers through the market. The model allows for a marginal opportunity cost of government revenues greater than one dollar. In addition, in the model, food aid from overseas may be either given away to the consumer, or given to the government for subsequent sale in the domestic market. The results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers. In addition, an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity.     

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.     

Nutrient effects in consumer demand systems: evidence from panel data

This papers aims to analyse the demand for main food groups in Spain. Apart from the traditional economic factors (prices and income), our theoretical framework incorporates the nutrient composition of food into a demand model in the form of food attributes, as a proxy to take into account the rising consumer concern about the relationship between diet and health. A CBS functional form is chosen for the empirical model, which is estimated using a complete panel data set. Ten broad categories, nine nutrients and the most relevant socio-economic variables have been considered. Finally, after employing an appropriate selection strategy, the chosen model is used to calculate expenditure, price and nutrient elasticities, as well as the main socio-demographic effects. Results indicate that the introduction of nutrient-based determinants generates elasticities that differ from those obtained when only economic factors are included, particularly in the case of price elasticities. As the nutrients effect is incorporated in the model through adjusted prices, unhealthier food groups (cereals, white meat and eggs, dairy and sugar) become more inelastic as they are associated with higher perceived prices.     

A cost-benefit analysis of a public labelling scheme of fish quality

The purpose of this paper is to introduce a new method capable of evaluating the economic welfare for quality graded fish products using the hedonic price method for plaice in Denmark. Today, no labelling scheme exists for the final consumers of different qualities of fish. A scheme only exists at the first hand market. On this basis, a general applicable, theoretical and empirical method is developed to compare the costs and benefits of the hypothetical choice between the total absence of labelling and the presence of a public labelling scheme, which fully informs consumers on the quality and simultaneously allows the producers to differentiate prices between quality grades. It is shown that the economic welfare associated with a public labelling scheme is at minimum €263,000. Sensitivity analysis shows that this result is robust. The policy implication is that a public labelling scheme should not be implemented as the demand and cost functions have low elasticities, implying that the welfare gain is low.     

The income elasticity of meat: a meta‐analysis

The demand for meat has been estimated by many studies utilizing various data and estimation methods. In this study, we perform a meta‐analysis of the income elasticity of meat that involves regressing 3357 estimated income elasticities, collected from 393 studies, on variables that control for study characteristics. Across several meta‐regression specifications, we find significant differences in income elasticities tied to the type of meat being studied, as well as a few functional forms, data aggregations, publication characteristics, and locations of demand. However, many study characteristics do not significantly influence reported income elasticities. Less concern should be given to such characteristics when choosing an income elasticity from the literature.     

Household Food Demand in Burkina Faso: Implications for Food Policy

Chronic food production deficits since the early 1970s have prompted policymakers of Burkina Faso to emphasize technological research with the goal of increasing the production of the most-consumed locally-grown cereals: sorghum, millet and maize. Meanwhile, urban consumers have been developing preferences for rice and wheat, cereals that are primarily imported. This study estimates demand relationships among food items in Ouagadougou, Burkina. The results of the estimation suggest that prices, income, household composition, education, marital status and urbanization were jointly important in explaining household expenditure allocations. Both local and imported cereal consumption responded positively to an income increase. However, incremental income changes would lead to relatively greater consumption of locally produced cereals by low-income households whereas high-income households would consume relatively more wheat and rice. The household model is then used to demonstrate its relevance in addressing food policy issues, by forecasting the levels of urban grain demand under alternative income and demographic scenarios. With increased production due to advances in technology, the urban demand levels do not exhaust the rural surplus of local cereals, but deficits persist in the rice-wheat sector. The results underscore the importance of technological research since Burkina could become self-sufficient in at least the production of sorghum, millet and maize.     

THE DEMAND FOR MEAT — AN EXAMPLE OF AN INCOMPLETE COMMODITY DEMAND SYSTEM*

Equations describing the demand for beef and veal, mutton, lamb, pork and chicken are estimated using the full information maximum likelihood estimator. Elasticity estimates are presented and the double logarithmic model is compared with a demand system which is derived from the indirect translog utility function. Estimates of the direct price and income elasticities are not particularly sensitive to model specification but the estimated cross-price elasticities are sensitive to the choice of functional form. The results indicate that the double logarithmic specification may be less satisfactory than the alternative presented in cases where restrictions on the parameters are imposed during estimation.     

Economics of household food waste

Food waste has drawn increasing public attention, and the high levels of estimated waste are largely considered to be a failure of our current food system. Recently, economists have begun to weigh in, showing food waste can emerge as the result of a complex equilibrium affected by consumers’ preferences for convenience; expectations about future food prices and availability; food safety concerns; producers’ costs of holding inventory, transportation, and storage; government regulation; and technology. If food waste is a form of inefficiency, there are either strong economic motivations to reduce waste, or unmeasured costs or preferences affecting waste decisions. If consumers have behavioral biases, suffer from information asymmetries, or do not pay the full cost of their waste, there may be a role for government intervention to reduce waste, but most empirical models in the literature have not articulated or quantified the extent of the deadweight loss from the market failures in relation to food waste. In some cases, waste reduction efforts could harm producers if overall demand for food is reduced or harm consumers if overconsumption is encouraged, quality or safety degrades, or supply disruptions occur. Technological innovations, which lower the cost of storage or extend shelf life have the potential to improve both consumer and producer welfare.