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On Price Indices in the Almost Ideal Demand System
Abstract
A number of papers have discussed the relationship between the Almost Ideal Demand System (AIDS) and its linear approximation
(LA/AIDS). In this paper, it is shown that if the prices in the system are normalized to one, the AIDS and LA/AIDS representations
are identical at the point of normalization. Also, at the point of normalization, the expressions for price and expenditure
elasticities from both systems are identical.
... Which is the translog Price index where 0 α corresponding to the "subsistence" expenditure (Asche & Wessells, 1997). The translog Price index is often replaced in their linear approximation of the AIDS model (LA/AIDS) by the stone price index below. ...
... Although our research elasticities are determined using R package "micE-conAids" proposed by (Henningsen, 2017), the theoretical formulas used to estimate the elasticities are stated in equations (9) and (10). The Marshallian (uncompensated) own and cross price elasticity coefficients from generalised AIDS corresponding to model (2) are given by the following formula (9) (Asche & Wessells, 1997;Buse & Chan, 2000). ...
... The expenditure elasticity for the generalised AIDS model is given by the following formula (10) (Asche & Wessells, 1997;Buse & Chan, 2000). ...
This paper investigates the demand for lamb, beef, pork, and poultry in Canada, both at the national level and in disaggregated provinces, to identify meat consumption patterns in different provinces. Meat consumption plays a significant role in Canada’s economy and is an important source of calories for the population. However, meat demand faces several consumption challenges due to logistic constraints, as a significant portion of the supply is imported from other countries. Therefore, there is a need for a better understanding of the causal relationships underlying lamb, beef, pork, and poultry consumption in Canada. Until recently, there have been no attempts to estimate meat consumption at the provincial level in Canada. Different Almost Ideal Demand System (AIDS) models have been applied for testing specifications to circumvent several econometric and theoretical problems. In particular, generalized AIDS and its Quadratic extension QUAIDS methods have been estimated across each province using the Iterative Linear Least Squares Estimator (ILLE) estimation Method. Weekly retail meat consumption price and quantity data from 2019 to 2022 have been used for Canada and for each province namely Quebec, Maritime provinces (New Brunswick, Nova Scotia, and Prince Edward Island), Ontario, total West (Yukon, Northwest Territory and Nunavut), Alberta, Manitoba-Saskatchewan and Manitoba as well as British Columbia. Consistent coefficients and demand elasticities estimates reveal patterns of substitution and/or complementarity between the four categories of meat. Meat consumption patterns differ across each province. Results show that the demand for the four categories of meat is responsive to price changes. Overall, lamb expenditure was found to be elastic and thus considered a luxury good during the study period, while the other three categories are considered normal goods across Canada.
... In fact, by replacing translog price index e.g. by Stone`s price index, we get only linear approximation, which is not as accurate as the original model (Blundell and Robin, 1999;Mizobuchi and Tanizaki, 2014). However, the LA-AIDS is frequently considered sufficiently good model and it has done pretty well in comparison to other models, for example quadratic or generalized AIDS (Alston et al., 1994;Asche and Wessells, 1997;Liu et al., 2003). Usually existing data gives guidelines to model selection but it is not so clear which model is appropriate in particular situation (Meyer et al., 2011;Smutná, 2016). ...
... (Pashardes, 1993) claims that Stone index approximation can lead to biased results. However, if the prices are normalized to one as done in present study, the Stone`s price index is corrected and it corresponds to loglinear analogue to a Paasche index (Asche and Wessells, 1997). ...
... Still, the estimated results of linear and non-linear AIDS are often close to each other's (Bilgic and Yen, 2014;Smutná, 2016). As Asche and Wessells (1997) pointed out, if the prices are normalized to one, the results obtained from linear and non-linear AIDS are rather similar. In general quadratic form of the AIDS (QAIDS) is considered the best fitting AIDS model but Liu et al. (2003) specified that importance of quadratic term decreases when censored and demographic effects are taking into account. ...
... The true AIDS model is known to be non-linear and difficult to estimate (Akinleye and Rahji, 2007), and many researchers choose to use a linear approximation of the Almost Ideal Demand System (LA/AIDS). Asche and Wessells (1997), Green and Alston (1991), Hahn (1994), Moschini (1995), Moschini et al. (1994), and Pashardes (1993) discussed in their works the relationship between AIDS and LA/AIDS. The difference between two systems is found to be in the form of the price index used. ...
... The Stone price index which is an approximation proportional to the translog price index is widely used in LA/AIDS model (Asche and Wessells, 1997): ...
... Moschini (1995) called Stone's index an improper price index. It is often noted that applying Stone's index will cause the units of measurement error (Asche and Wessells, 1997;Moschini, 1995). To solve the problem of unit measurement errors, the prices should be scaled by the means of observed expenditure shares (Moschini, 1995;Bilgic and Yen, 2013). ...
The results found in this study have implications for local Nigerian food producers, retailers, other participants of the food sector, and government food policy makers. In this thesis the demand analysis for onion, peppers, fresh okra and tomato in Nigeria was conducted using General Household Survey data collected by the World Bank and the Nigeria National Bureau of Statistics. The two stage estimation procedure and Linear Approximation Almost Ideal Demand System addressing censoring were used to analyze the demand system. The analyses are based on the assumption that every household is maximizing its utility subject to a budget constraint. Standard errors on both stages of the estimation as well as for the calculated elasticities were adjusted using a bootstrap procedure. Most of the demographic characteristics determining consumption were significant. Marshallian cross price elasticities suggest that the products are a mix of gross substitutes and complements, whereas positive values of Hicksian cross-price elasticities indicate that all vegetables are net substitutes. According to expenditure elasticities, not all of the vegetables appear to be normal goods. Negative expenditure elasticity for fresh okra indicates that the vegetable is an inferior good. A combination of policies that increase purchasing power of population, and fosters food supply would benefit a developing country, like Nigeria, the most. Increased supply would trigger an increase in quantity demanded, improving the livelihood of agricultural producers, poor households and potentially creating more jobs in agricultural and related industries.
... where p j denotes the price per unit of good j, x is the per capita expenditure on the goods included in the system, and P is a price index. As discussed in Asche and Wessells (1997), the Törnquist price index can be used. This index is defined by: As in Gustavsen and Rickertsen (2014), we included the APC variables. ...
... the expenditure share and Laspeyres price index of good i evaluated at the point of normalization. As recommended inAsche and Wessells (1997), we normalized the index at the mean values for all households and periods. ...
Over their life course, people change their consumption habits when prices, income, tastes or nutritional needs change. The time period during which an individual grew up is often reflected in his or her consumption of different types of food. To investigate the possible links between demographic changes and food consumption, we constructed two-step censored demand systems for different groups of foods. We estimated the systems using Norwegian data for the 1986-2012 period. In the systems, age, period, cohort, other demographic and economic variables are included. The estimated systems are used to construct a long-run forecasting model for meat and dairy products. In this model, younger cohorts replace older cohorts with a different consumption pattern. The total purchases of beef, lamb, pork and fluid milk are predicted to decrease, while the total purchases of chicken, yoghurt and cheese are predicted to increase towards 2027.
... The only difference between the full AID model and its linear version (linear AID) lies in the specification of the price index. Several authors, including Green and Alston [36], Pashardes [37], Alston et al. [38], Buse [34], Hahn [39], Moschini et al. [40], Moschini [41] and Asche and Wessels [42], have discussed the relationship between the nonlinear and linear specifications. When prices are highly collinear, it may be adequate to approximate P as proportional to some known index, P * . ...
... As Asche and Wessells [42] observed, Stone's [43] index is commonly used to replace the price index, P, for the linear AID estimation, where w is the budget share among the destinations. The Stone index is an approximation proportional to the translog, that is, ...
... The linear approximate AIDS "LA/AIDS" model is the one that uses Stone's pricing index. Because prices will never be exactly collinear, the unit of measurement error will always exist when using the Stone index (see Alston, Foster, Green, 1994;Moschini, 1995;Asche and Wessells, 1997). To overcome the measurement errors a Laspeyres pricing index can be used as suggested by (Moschini, 1995). ...
Research background
Income and prices are important factors that determine and decide households consumption decisions and behavior.
Purpose and research methodology
This paper aims to examine fruits’ demand elasticities in Pakistan by using the Linear Approximate Almost Ideal Demand System (LA/AIDS). For this purpose, data from the Household Integrated Economic Survey (HIES) 2018–2019 part of Pakistan Living Standard and Measurement is used for the selected fruits.
Results
Marshallian, Hicksian, and expenditures elasticities were calculated through the estimated parameter from the Linear Approximate Almost Ideal demand system. The results show that all the estimated expenditure elasticities of the selected fruits for Pakistan are positive. The magnitude of expenditure elasticities for bananas, malta, apple, grapes, watermelon, plum, and almonds, is less than unity, and are thus categorized as normal food items. The estimated uncompensated own price demand elasticities for all fruits are less than unity (inelastic) for Pakistan and thus categorized as necessities. Based on the cross-price uncompensated demand elasticities eighteen fruits are reported as gross complements and three fruits are gross substitutes. Most of the fruits are categorized as neutral fruits having no cross-price effect on each other’s demand as their estimated elasticities are closer to zero. Only apples with grapes and almonds are found to be notable substitutes. As most of the price elasticities of fruits are inelastic, any change in their price would result in a massive increase in expenditure on these fruits. As a result, the government may adopt policies for the stabilization of fruit prices to meet the minimal daily food requirements of the lower segments of society.
Novelty
This study is an attempt to estimate demand elasticities for individual fruit as very little research is available in the study area for individual commodities.
... The QUAIDS model was created as an expansion after [3] criticized the AIDS approach created by [8] for producing biased and inconsistent results. In order to determine income, own price and cross-price elasticities for this study, the QUAIDS forecasted by [4], [5] will be used to analyze the impact of demographic determinants on the US household consumption of several selected foods (such as oats, wheat, corn, and cowpea). ...
This study estimated the effect of demographic factors on the US household consumption of some selected food using the Quadratic Almost Ideal Demand System (QUAIDDS). Quarterly Food-at-Home Price Database from 2004-2010 from the USDA site was used, containing information on prices, total expenditure, household size, divisions, and regions, respectively. Average household size was used because the data have different numbers of households across all divisions and regions. Demand for the selected food groups was estimated using Quadratic Almost Ideal Demand System (QUAIDS). The result of the QUAIDS model showed that all the expenditure elasticities were positive and statistically significant at the percent level, which implies that food items are normal goods. Furthermore, it was revealed that raw sugar (.96725022), ice cream/frozen desserts (.95327974), baked good mixes (.97466743), and bakery items ready to eat (.99237186) are necessities since their coefficients were less than one. Additionally, all own-price elasticities were negative, as expected in both compensated and uncompensated price elasticities estimated for food items. The result also revealed that baked good mixes were a substitute for raw sugar, bakery items ready to eat were substituted goods for non-carbonated calorie beverages, raw sugar and packaged sweets/baked goods was a substitute for good mixes, and non-carbonated calorie beverages was substitute for bakery items ready to eat which is an indication that foods were substitutes. In addition, Marshallian cross elasticities show that both baked goods mixes and packaged sweets/baked goods were substituted goods for raw sugar, and ice cream/frozen desserts were substituted goods for non-carbonated calorie beverages. Packaged sweets/baked goods and bakery ready to eat were substituted goods for ice cream/frozen desserts, and raw sugar and packaged sweets/baked goods were substituted goods for baked goods mixes. Also, raw sugar, ice cream, and frozen desserts, baked goods mixes were substituted for packaged sweets/baked goods. In contrast, non-carbonated calorie beverages and ice cream/frozen desserts were substitutes for bakery items ready to eat. Therefore it is recommended that economic policies be made to prevent fluctuations in food prices in the US.
... One of the criticisms of such approximation is that in LA-AIDS estimation, the Stone price index is treated as exogenous, while it is defined in terms of budget shares which are the endogenous variables in the left-hand side of the model. However,Asche and Wessells (1997) showed that if the prices in the system are normalised to one, the AIDS and LA/AIDS representations are identical at the point of normalization and the expressions for price and expenditure elasticities from both AIDS and LA/AIDS systems are identical. ...
The traditional applied demand system estimation assumes that when consumer
income and commodity prices change, the consumers instantaneously fully adjust
to a new consumption equilibrium level and use a static demand system such as Static
Linear Almost Ideal Demand System (Static LA-AIDS) for estimation. However, in
real-life situations, such an assumption does not hold as consumers take time to settle
to a new consumption equilibrium level. Hence, dynamic demand system estimations
generate more nuanced insights into the short-run dynamics of consumer demand. This
paper estimates two forms of dynamic versions of AIDS, Dynamic LA-AIDS and the
error-corrected LA-AIDS, and compares the results with the Static LA-AIDS. The
paper also models the consumption patterns of consumers in developed and developing countries and provides a comparative analysis of implied elasticities using recent
data. The results show that the dynamic models support demand theory hypotheses—demand homogeneity and Slutsky symmetry—more than the static model. The
estimated mean own-price elasticities reveal that the demand in the short-run and long-run is price inelastic across all countries. Long-run and short-run income elasticities demonstrated notable variation across various commodity groups and country groups.For example, the restaurant meal is a luxury in the short-run for all countries. In the long-run, it is a necessity in developed countries and a luxury in developing countries. Food and housing are necessities; durables, transport and recreation are luxuries in developed and developing countries in the long-run and short-run.
... However, the price index in Equation (2) raises difficulties of estimation because of non-linearity in parameters. To avoid the non-linearity problem, Asche and Wessells (1997) suggested the application of the Stone index, which is widely used for LA/AIDS estimation. Moschini (1995) suggested the creation of a log-linear analog of the Laspeyres price indexes as: ...
... However, this study follows Asche and Wessells (1997) to calculate uncompensated (Marshallian) and compensated elasticities (Hicksian). ...
The study aims to conduct a consumer demand analysis of the food market of Pakistan by estimating its own price and cross-price elasticities. This study also examines expenditure and income elasticities to show the influence of relative change in price, total expenditure, and income on the relative change in demanded quantities of the selected food products. The study takes meat, vegetables, fruits, and pulses as different food baskets and estimates income elasticities, including uncompensated (Marshallian) and compensated (Hicksian) own price and cross-price elasticities. The findings are concluded based on Marshallian elasticity as it provides more accurate images of substitutes and complements compared with Hicksian elasticity. The study applies the Linear Approximate Almost Ideal Demand System model to estimate the results by acquiring data from a household integrated economic survey of Pakistan from 2018 to 2019. The findings of expenditure elasticity (uncompensated own price elasticity) reveal that vegetables and pulses are normal (inelastic) goods, whereas meat and fruits are luxury (elastic) goods. The results of uncompensated cross-price elasticities reveal that vegetables and meat, and vegetables and fruits are substitutable commodities. In addition, pulses and vegetables, and pulses and meat are complementary goods. The study suggests fruitful implications for food policymakers.
... STAGE III: The linear expenditure form of the AIDS model is well adapted for the econometric estimation of expenditure and price elasticities, but it has been criticized for producing inconsistent and biased parameter estimates in most cases (Asche and Wessells 1997). Banks, Blundell, and Lewbel (1997) show that Engel's curve requires the quadratic expenditure term because Engel's curve is not always linear. ...
We estimate demand elasticities for fish in Myanmar by fish supply sources and household groups, using a multistage budgeting approach combined with quadratic almost ideal demand system (QUAIDS). Our findings show that fish demand from all supply sources and household groups has increased with income. A substantial share of increasing demand for all fish groups is likely to come from poor and rural households because the income elasticity of demand for all fish groups is higher for poor (0.40) and rural households (0.32) than for nonpoor (0.26) and urban households (0.29). Farmed-fish consumption is the most income-responsive in all household groups. Demand for fish tends to be less price elastic for poor households because fish is their cheapest animal protein source, and substitutes are limited. Effective management policies and new technologies are essential to sustain fish supply from capture fisheries and aquaculture to meet the increasing fish demand in Myanmar.
... STAGE III: The linear expenditure form of the AIDS model is well adapted for the econometric estimation of expenditure and price elasticities, but it has been criticized for producing inconsistent and biased parameter estimates in most cases (Asche and Wessells 1997). Banks, Blundell, and Lewbel (1997) show that Engel's curve requires the quadratic expenditure term because Engel's curve is not always linear. ...
We estimate demand elasticities for fish in Myanmar by fish supply sources and household groups, using a multistage budgeting approach combined with quadratic almost ideal demand system (QUAIDS). Our findings show that fish demand from all supply sources and household groups has increased with income. A substantial share of increasing demand for all fish groups is likely to come from poor and rural households because the income elasticity of demand for all fish groups is higher for poor (0.40) and rural households (0.32) than for nonpoor (0.26) and urban households (0.29). Farmed-fish consumption is the most income-responsive in all household groups. Demand for fish tends to be less price elastic for poor households because fish is their cheapest animal protein source, and substitutes are limited. Effective management policies and new technologies are essential to sustain fish supply from capture fisheries and aquaculture to meet the increasing fish demand in Myanmar.
... Performance of area, yield and production of rice in India during the last three decades shows deceleration in the growth rate of yield for rice. With the rice area growth not compensating for the deceleration in yield growth, the growth rate of rice production has come down to 1 There were a number of studies by different researchers on demand and supply of foodgrains in India and the world in general. Most of these studies employed the Almost Ideal Demand Systems to estimate the demand for rice among which are, Frank, (2000), Ghosh and Raychaudhuri, (2004) and Srivastava et al, (2013). ...
... The price of each product variety was calculated using the Stone Index. 29 For each product variety, j , the Stone Index, P S j , is defined as ...
Objectives
This study assessed the extent to which the elasticity of cigarette and waterpipe tobacco products differs between men and women. We also explored the levels of substitution and complementarity in tobacco products among men and women.
Setting
The study examines tobacco elasticities in three Arab countries: Lebanon, Jordan and the West Bank of Palestine.
Participants
We used data from nationally representative surveys of adults aged ≥18 years in Lebanon (n=1680), Jordan (n=1925) and Palestine (n=1679). The proportion of women was 50.0% of the sample in Lebanon and Palestine, and 44.6% in Jordan.
Primary and secondary outcome measures
A zero-inflated Poisson regression model estimated own-price and cross-price elasticities for two variations of cigarettes and five variations of waterpipe tobacco products. Elasticities were measured based on eight scenarios of prices.
Results
Demand for waterpipe tobacco products was elastic for both men and women. The cross-price elasticities in the three countries indicate the existence of substitution between cigarettes and waterpipe products and by different varieties within each of the two tobacco products. Gender differences varied across the three countries whereby higher cross-price elasticities were observed for women in Jordan and Palestine. For example, the price elasticity for discount waterpipe was −1.4 and −0.6 for women and men in Jordan, respectively.
Conclusions
Results on the elasticity of demand for tobacco products and the existence of substitution between tobacco products reveal the higher responsiveness of men and women to changes in tobacco prices. This should be taken into consideration in tobacco control strategies particularly when reducing tobacco consumption via taxation policies.
... Although Stone's price index is widely used to linearize the AIDS model, the problem of simultaneity (Eales & Unnevehr, 1988) and measurement error (Alston et al., 1994;Asche & Wessells, 1997;Moschini, 1995) remains. To deal with these problems, we have used Laspeyres price index which is considered as superior among other price indexes for generating unbiased estimators of expenditure and price elasticities (Buse & Chan, 2000;Moschini, 1995). ...
This study examines the fish consumption pattern of households in Bangladesh. We use data of the national Household Income and Expenditure Survey (HIES) to develop a demand model disaggregated by fish types and income groups. We apply a two-step censored regression model to estimate price and income elasticities. Results show that poor and non-poor households consume similar types of fish. However, poor households rely more on fish as their primary source of animal protein. As income increases, the fish consumption of the poor rises more than for the non-poor. Additionally, fish price increase will lead to a deterioration of their nutritional conditions. In terms of fish species, the study finds that carps, pangasius, barbs and tilapia, mainly sourced from aquaculture, and small catfish, mainly sourced from capture fisheries, are the most frequently consumed fish species for the households in Bangladesh. The paper also finds that aquaculture has good potential to compensate for the decline of fish supply from inland capture fisheries.
... The frequent adjustments of the monthly bluefin auction price in Tsukiji demonstrate high responsiveness to the highly seasonal global landings. This justifies the use of an inverse demand analysis, also advocated by other analysts of global seafood markets [32] [16]. ...
This paper estimates the price changes in global bluefin tuna (BFT) markets in response to shifts in regional and global landings to evaluate the conservation and economic incentives from changes in the Total Allowable Catch (TAC) managed by all three Regional Fisheries Management Organizations. A fisherman's income, and thus the financial incentive to accept management measures controlling catch levels, depends in part on how responsive price is to overall catch. Individual fisherman, with their own best interest in mind, used to wish to increase their individual landings and create an incentive to ask to increase the TAC for the industry, without realizing the possible revenue loss due to the resulting falling prices. To protect the value of all stakeholders' property rights, a consensus to avoid abruptly raising the TAC, without first considering the potential loss due to market response, is needed. Alternatively, if revenue increases with lower TAC, a positive economic incentive for conservation is created if price increasing proportionately more than the lower supply, with harvest profits boosted by lower costs of production. To capture the complexity of substituting across various sources of supply and product form, a general synthetic inverse demand system is estimated to identify the impact of overall landings on BFT prices. This system estimates price flexibilities of both fresh and frozen longline-caught sashimi-grade tunas (Pacific, Atlantic and southern bluefins, and bigeye) at the Tokyo Center Market in Japan, including the Tsukiji Market, the world's largest fish auction market that served as the single global price leader for BFT. The resulting estimation shows that own-quantity price flexibilities of every type of fresh and frozen BFTs are less than unity and inflexible in their own consumption. This creates poor individual producer incentives for fishermen to reduce wild or farmed BFT supply, as there is a chance to increase their own revenue, under the unlikely condition that the total supply is fixed. However, by observing the rapid increases in the TAC of Eastern Atlantic bluefin tuna (EABFT) in the coming years, suppliers may not be better off as price will drop proportionally faster and total revenue if the estimated scale flexibility is greater than one. Based on the estimated scale flexibility of frozen BFT, which is slightly less than unity, the frozen subsector of EABFT suppliers is the only winner under the supply increases. Suppliers of frozen BFT in other regions, fresh BFT (in the Atlantic and elsewhere), and southern BFT and bigeye tuna will all be harmed through lower revenue by the supply increases. Additionally, while total revenue might stay the same for frozen BFT suppliers, fishermen will potentially receive lower profits due to higher operating costs associated with increased landings when the supply of EABFT increases. Given the number of sectors that ultimately lose financially in the short term and given the ecological (and production) risks accompanying an abrupt increase in fishing pressure in the long term, the global economic losses resulting from an increase in the allowable catch of Atlantic bluefin tuna will outweigh any potential increases to revenue.
... (1) with log P replaced by Stone's price index is known as the LA-AIDS, which has been extensively used in the literature. As shown by Asche and Wessells (1997), the AIDS and the LA-AIDS representations are identical at the point of approximation, as long as the prices in the system are normalised to one. ...
Static-demand systems used in empirical studies are based on the assumption that consumers immediately and
fully adjust to a new equilibrium when either incomes or prices change. In reality, consumers are unlikely to have
adjusted to equilibrium in each time period and the assumption of instantaneous adjustments by consumers is
potentially incorrect. The dynamic modelling approach allows for intertemporal rationality of consumer behaviour
by explicitly considering the mechanism underlying the short-run adjustment process. This study, while
considering the traditional static Almost Ideal Demand System (AIDS), in addition, considers two dynamic versions
of the AIDS to model the dynamic behaviour of Sri Lankan consumers in consuming eight broad commodity
groups using data during the period 1963–2016. The estimated results indicate that all commodities have price
inelastic demand in both the short and long run. The differences between short- and long-run demand elasticities
indicate the need to adopt a dynamic approach in estimating demand elasticities, because the income and price
elasticities are key inputs for policy analysis in economy-wide modelling.
... The AIDS, first introduced by Deaton and Muellbauer (1980) became popular thanks to its consistency with consumer theory (Ryan and Wales, 1999). Subsequently, a quadratic version (QUAIDS) that accounted for non-monotonic response of expenditure shares to total expenditure increase (Banks et al., 1997) was proposed to correct potential misspecification of the functional form of preferences of the original model (Asche and Wessells, 1997). In the QUAIDS, the consumer indirect utility function (V) of each HH 4 is represented as follow: ...
The Farm Input Subsidy Programme (FISP) in Malawi was introduced in the 2005/2006 season against a background of bad weather affecting production and prolonged food shortages. Vouchers are distributed empowering eligible farmers to exchange them for fixed quantities of inputs at subsidized prices. Since its inception, there has been a debate at national level about whether the FISP’s potential has been fully exploited, with policy makers exploring options to improve the programme. Proposals include targeting efficient and productive farmers to maximize returns. In this paper, we evaluate the effectiveness of these proposed changes to the existing FISP design by utilizing two waves of the LSMS-ISA survey merged with climatic data. We estimate how the national demand for agricultural inputs varies according to a variation in the targeting criteria by means of a two-stage demand system. Then, we identify more efficient farmers by means of a stochastic frontier approach. We observe a mismatch between voucher recipients and efficiency, with approximately 60% of vouchers being allocated to the three bottom quintiles of efficiency. This mismatch is observed also at the spatial level with more vouchers going to districts characterized by less efficient production. While concerns on the distributional impacts of the new criteria are discussed together with some suggestions for spatially diversifying the structuring of the policy and incentivizing crop diversification, our results highlight a high substitutability of commercial with subsidized inputs by new eligible farmers. Consequently, simulating the targeting policy variation we obtain an outcome that would lead only to a limited increases in predicted food expenditure ranging from 0.27% to 0.8% and maize production from 0.2% to 1.3. Scope for analysing different adjustments in the functioning of FISP are, thus, proposed to policy makers.
... The QUAIDS model is an extension of the almost ideal demand system (AIDS) model developed by Deaton and Muellbauer (1980). The AIDS model has been criticised for yielding inconsistent estimates (Asche and Wessells 1997), and nonparametric analysis of consumer expenditure patterns suggests that the Engel's curve requires quadratic terms in the logarithm of expenditure (Banks, Blundell, and Lewbel 1997). Banks, Blundell, and Lewbel (1997) improved the AIDS model by adding a quadratic expenditure term, which led to the development of the QUAIDS model. ...
We estimate elasticities of demand for fish, categorized by their origin (inland capture, marine capture, and aquaculture), for poor and non-poor households in Bangladesh and analyze implications for food security and fisheries management. Demand for fish from all sources and by all households increases with income. Elasticities of demand for aquacultured and inland-captured fish are higher for poor households than non-poor. Technological progress has driven reduction in the real price of farmed fish. Effective management of all fish sources is important for food security, but increasing supply from aquaculture and inland capture fisheries will have the most significant effects.
... This stone price was used in the model for estimation of non-linear form of the AIDS model in linear form. Although some economists like Moschini (1995), Asche and Wessels (1997) criticize and felled that price index may lead to introduction of measurement errors; in spite of the fact stone price is used. ...
... To avoid singular covariance matrix, equations of entrée and shellfish-entrée were dropped in DD1 and DD2, respectively. 6 Elasticities from LA-AIDS were calculated as in Asche and Wessells (1997). Statistical significance of elasticities was obtained using the method of firstorder Taylor series expansion around variable means (see e.g., Goldberger, 1991, p. 102). ...
Frozen seafood marketing in grocery stores in the United States (U.S.) has undergone substantial transformation as a result of the introduction of value-added and convenience products into the category. However, it is not yet clear whether consumers perceive these value-added products to be substitutes for the traditional unbreaded products. We model the demand for frozen seafood in the United States using the linear approximate almost ideal demand system (LA-AIDS) employing market-level monthly retail scanner panel data. Our emphasis is on the demand relationships between the three aggregate frozen seafood categories, namely, breaded products, entrées and unbreaded products, and on the demand relationships for these categories when disaggregated as finfish and shellfish. We use fixed effects on the spatial and temporal variation in demand and incorporated demographic shifter variables. Our results show that unbreaded products, as compared to value-added categories of breaded seafood and seafood entrées, would gain market share if expenditure on frozen seafood increases. We also find that unbreaded products are stronger substitutes for value-added products than vice versa. We explore similar relationships between frozen shellfish and finfish products. Unbreaded shellfish can be expected to gain market share if expenditure on frozen seafood were to increase.
... In this article, the QUAIDS model proposed by Banks, Blundell, and Lewbel (1997) is used for the specification of the fish and seafood demand system in order to derive income as well as own-price and cross-price elasticities. The QUAIDS model is an extended form of the Almost Ideal Demand System (AIDS), developed by Deaton and Muellbauer (1980), as the AIDS approach has been criticized for yielding biased and inconsistent estimates (Asche and Wessells 1997). Since empirical research indicated that Engel curves are not always linear (Lewbel 1991;Blundell, Pashardes, and Weber 1993), Banks, Blundell, and Lewbel (1997) improved the AIDS by adding a quadratic expenditure term to the model, which led to the QUAIDS model. ...
The production of farmed fish is growing rapidly and presents a sustainable and possibly low-cost alternative to wild fish. Thus, we may expect retail prices of farmed to be lower than prices of wild fish and demand to be less elastic. Otherwise, marketing of farmed fish may generate some extra value that justifies higher prices and may exhibit more elastic demand. To test these hypotheses, we employ monthly household scanner panel data for Germany from 2006 to 2010 for six frozen seafood products that include farmed and wild fish. A QUAIDS model is estimated by a consistent two-step procedure to account for censoring of the dependent variable. We find consumers to be price sensitive, particularly with regard to the high-value seafood species salmon and shrimp. This price elastic market implies that the German seafood industry still has the potential for growing revenues if production increases.
... In our case, E would represent total expenditures on lettuce and PI represents an appropriate price index. By specifying the model with ln Q we avoid the challenging trade-off among different aggregate price indices used in the various AIDS models (Asche and Wessells, 1997). Nevertheless, the interpretation of the coefficient on ln Q remains the same as in the common version of the AIDS model (Lee et al., 1994). ...
... First, the nonlinear AIDS model is defined as equation (1) aforementioned with P expressed as: The first order conditions can be derived for the cost function or the expenditure share function for beef, pork, chicken, ocean shrimp, and penaeid shrimp respectively and the nonlinear price index function. Second, a linear approximation of the nonlinear AIDS model also suggested by Deaton and Muellbauer (1980) is specified as equation (1) To calculate the elasticity, Asche and Wessells (1997) and Edgerton et al. (1996) suggested formulae for the nonlinear AIDs model estimation. These formulae are specified as follows: a) Total Expenditure Elasticity: ...
This paper analyzes the demand for shrimp along with beef, pork, and chicken in the US
food market, which contributes much to predicting supply strategies, consumer preferences
and policy making. It focuses on the own and cross elasticity relationship between the
expenditure share, price, and expenditure changes. An Almost Ideal Demand System (AIDs)
model and two alternative specifications (both nonlinear AIDs and LA-AIDs) are used to
estimate a system of expenditure share equations for ocean shrimp, penaeid shrimp, beef,
pork, and chicken. Empirical results from nonlinear AIDs model is compared with those
from LA-AIDs model. There are quite a few inconsistency between nonlinear and LA results.
Results from nonlinear are more expected and more complied with microeconomic theory
than those from LA. Also, results indicated that some insignificant slope coefficients and
inappropriate signs of them did not comply with microeconomic theory. This could be caused
by heteroscedasticity, autocorrelation, a limitation in the data used, or shrimp is a quite
different commodity.
... where w it is the expenditure share of good i in period t, p it is the price of good i in period t, Y it is the total expenditure per consumer unit in period t, and P t is a price index. We apply the T€ ornquist price index, discussed in Asche and Wessells (1997), which is defined by ...
Food production contributes considerably to global greenhouse gas (GHG) emissions. Animal products - particularly meat from ruminants - generally have higher GHG emissions than plant products. Over the last few decades the global per capita consumption of animal products has increased. This has a negative impact on climate change, land and water availability, and human health. We are faced with the two-fold challenge of reducing GHG emissions while still producing enough food for our growing population. Part of the solution could be for consumers to change towards a more sustainable diet. In this paper we take Norway as a case study for estimating optimal taxes and subsidies on different food items which can change consumption patterns in order to reduce the GHG emissions derived from the average Norwegian diet. In the estimate we ensure that the average calorie intake with the new diet remains the same as with the current diet, and factor in other health considerations. Our findings suggest that limited but useful emission reduction targets can be set with only a few changes in diets. The methodology presented in this paper may be used to estimate optimal climate taxes and subsidies under different emission, quantities, taxes, subsidies, and health constraints.
... Uncompensated price and expenditure elasticities are calculated using the standard formulas for LA/AIDS (Alston, Foster & Green, 1994;Asche & Wessells, 1997), with the price elasticity specified as: ...
This article evaluates the effects of extensive media coverage of a study published in 2004 regarding the presence of polychlorinated biphenyls (PCBs) and other organic contaminates in farmed salmon on U.S. import demand for fresh farmed salmon. The study indicated that levels of PCBs differed according to source, with highest PCB levels found in salmon from Northern Europe and lowest in those from Chile. Using a newspaper article index as a proxy for information, a two-stage demand model is estimated. In the first stage, total U.S. import demand for fresh farmed salmon is estimated to determine the overall effect of the information, while the second stage determines if there were any significant changes in market shares of source countries. Results indicate that imports declined by approximately one-third of what would have been in the absence of the PCB media stories during 2004–2006, and that some changes in exporters’ market shares occurred. Health implications for U.S. seafood consumers are discussed.
... As Asche and Wessells (1997) observed, Stone's (1953) index is commonly used to replace the price index, , for the linear AID estimation, where is the budget share among the destinations. The Stone index is an approximation proportional to the translog, that is, ≅ * , where (log ) = 0 . ...
... Moschini's (1995) cautioning against the use of the standard Stone index led many researchers to use other indices, such as the Laspeyres price index (Taniguchi and Chern, 1999). Asche and Wessells (1997) claimed that many of these Monte Carlo studies conducted to evaluate the indices used in the LA/AIDS model have the problem that the obtained results depend on the data set used. They suggested that if the prices are normalized to one, the AIDS and LA/AIDS representations are identical at the point of normalization. ...
The primary objective of this study was to investigate the effects of demographic and socioeconomic characteristics of the Hispanic households on their demand for meats, an important component in the diet of U.S households. A secondary objective was to compare the results with other ethnic groups in the United States. This research is expected to complement the results of earlier studies on food consumption patterns. A study of this nature offers improved information to producers, food processors, wholesalers, and retailers about the meat consumption patterns of the Hispanic community, and the role of socioeconomic factors and income transfer payments in the demand for meats in the U.S. In addition, the comparison with other ethnic groups contributes to a deeper understanding of the demand for meats within the context of the whole U.S. population.
... Si bien el modelo AIDS original no es lineal en los parámetros, comúnmente se utiliza una aproximación lineal conocida como LA/AIDS (Capps, Tedford y Havlicek, 1985;Chalfant, 1987;Eales y Unnevehr, 1988;Moschini y Meilke, 1989;Hayes, Wahl y Williams, 1990;Gould, Cox y y Perali, 1991). Las relaciones entre el modelo original y su aproximación lineal, así como del uso de los índices de precios en ésta última, han sido largamente debatidos en la literatura especializada (Green y Alston, 1990, 1991Chalfant, Gray y White, 1991;Pashardes, 1993;Alston, Foster y Green, 1994;Buse, 1994Buse, , 1998Moschini, 1995;Taniguchi y Chern, 1999;Asche y Wessells, 1997). ...
This article presents a set of methods for conducting empirical studies about food demand, by bringing together complementary approaches to attain valid conclusions, not only from the statistical but also the theoretical point of view. In particular, this proposal is based on the empirical estimation of incomplete demand systems, whose equations have limited dependent variables. This is an issue that frequently arises with cross section data, where the dependent variable is restricted to non-negative values due observations reporting zero consumption for certain goods during the survey period. The empirical analysis of a food demand system, as the one discussed here, allows considering a considerably high number of goods (equations) as well as a big number of observations (sample size). In this sense, the proposed methods become a very attractive alternative by offering an excellent theoretical framework for the economic interpretation of the empirical results. As a complement of both the economic and the econometric discussions, a brief example that illustrates the application of this set of methods in the empirical work is presented.
... The linear approximate form of the almost ideal demand system (LA/AIDS), which was popular for empirical studies in the 1980s and 90s, has been criticized more recently for yielding biased and inconsistent estimates in many cases (e.g. Asche and Wessells 1997). Banks et al. (1997) demonstrated that the appropriate form for some consumer preferences is of quadratic nature, suggesting the generalization of the basic AIDS. ...
Micronutrient malnutrition is a serious public health problem, especially in developing countries. Hence, evaluating the nutritional impacts of market and policy changes requires more than just a calorie focus. This work extends the traditional perspective and analyzes the effects of income, food price, and sociodemographic developments on vitamin and mineral adequacies at the household level. The author proposes two approaches to estimate income and price elasticities of nutrient consumption and presents a procedure for assessing the nutrition situation in populations based on food consumption data. Using both approaches demand models are applied in two empirical studies with data from rural East Africa and Malawi. Results suggest that the nutritional status is highly income-responsive. Price elasticities are lower in absolute values, albeit with notable differences between nutrients. Policy implications are discussed.
Qua việc ứng dụng phương pháp thống kê mô tả và phương pháp Box-Jenkins trong đó có thực hiện kiểm định tính dừng, kiểm định nhân quả cho mô hình hồi quy logarit kép và ARIMA, bài viết đã đề xuất mô hình phù hợp cho dự báo về sản lượng cá tra xuất khẩu từ Việt Nam vào thị trường Hoa Kỳ. Với số liệu chuỗi thời gian được thu thập từ UN-Comtrade và NOAA, kết quả cho thấy trong một năm sau sản lượng cá tra xuất khẩu vào thị trường Hoa Kỳ sẽ tăng tuy nhiên số lượng này sẽ giảm sau đó, mức độ giảm không nhiều và vẫn cao hơn so với hiện trạng (tính đến đầu năm 2017). Sau khi phân tích nhiều mô hình, nghiên cứu này đề xuất mô hình ARIMA để dự báo sản lượng cá tra xuất khẩu. Mặc dù cần có những nghiên cứu thêm để xem xét mô hình dự báo ở nhiều khía cạnh khác nhau, tuy nhiên kết quả này vẫn là tài liệu tham khảo cho những nhà quản lý, nhà kinh doanh và người sản xuất cá tra.
Despite recent dramatic growth in seafood consumption worldwide, knowledge about seafood demand is limited relative to other protein sources. We model demand across three major protein categories (i.e., terrestrial meat, seafood, and plant-based protein) in South Korea to fill the research gap. This study models a quadratic almost ideal demand system (QUAIDS) by utilizing household panel data. The study takes this one step further by modeling demand within four seafood categories (i.e., fish, cephalopods, shellfish, and crustaceans). Sociodemographic variables, including health-related factors, are incorporated into the demand models. Results indicate that seafood is in a complementary relationship with terrestrial meat while it is a substitute for plant-based protein. All four seafood categories are a substitute for each other. The results reveal that people who take their health seriously tend to consume more seafood, particularly fish. The results have economic and marketing implications for which strategies could be adopted to influence seafood consumption.
Fast population growth, increase in per capita income and increase in level of awareness among the people regarding health are the main causes of increase in demand for nutritional and protein rich food. Fish is very good source of protein as well as vitamins. Fish may play a vital role to ensure the nutritional security in rural areas. Fish production and consumption has however undergone major uneven changes in the past four decades. It is found that at higher ends of the income distribution, the consumption of milk, eggs, meat, fish and processed foods have risen. Present study focuses on the demand for fish in Delhi and NCR in comparison to other items like chicken, mutton and eggs. A Three Stage Budgeting Framework of demand is used for present analysis. NSSO data of household consumption has been used for analysis. Per capita consumption of "fish", "chicken" and "mutton" in Delhi and NCR were estimated and it was found to be 4.04 kg/ annum, 2.27 kg/annum and 0.81 kg/annum respectively. So, per capita consumption of "fish" was found to be greater than "chicken" as well as "mutton". Income elasticity of demand was estimated for each income group of population and in most of the cases demand for fish was found to be income elastic. Compensated as well as non-compensated price elasticity of demand for fish was also estimated. It was found that price elasticity of fish was almost unitary elastic whereas price elasticity of chicken" and mutton were price inelastic. Fish demand was also projected up to 2020 and it was found to be 5.11 kg/capita/ annum in 2020. With increase in income of the population as well as awareness of health benefit of fish, it is expected that fish consumption will increase at a very fast rate in future. However the presence of a large proportion of vegetarian population in Delhi and NCR is a challenging proposition for increasing of overall fish consumption of Delhi and NCR.
This chapter discusses empirical implementation of the systems of demand functions approach presented in the last two chapters. I address questions of functional form specification and statistical specification. The functional form question has been a long-standing issue in the area of consumer demand analysis. There are scores of functional forms and a comprehensive review on the possibilities, strengths, and weaknesses is not possible in this book. A brief review is given of the most significant functional forms in the literature. The approaches to functional form specification are based on: (i) direct derivation from the utility function, (ii) directly specified demand functions, (iii) derivation using duality theory applied to locally flexible functional forms, and (iv) derivation from globally flexible functional forms. The focus is on the two well-known workhorses in econometric analysis: the Rotterdam model (RM), and the almost ideal demand system (AIDS). Additional discussion centers on extensions of these two models to more general models which are currently finding popularity. These models include the CBS and NBER differential demand systems, and the EASI demand system.
This paper presents details of a project that uses available data to construct an econometric model of alcohol taxation in Vietnam. The project was developed through a funding agreement between the Asia Pacific International Wine and Spirits Alliance (APIWSA) and the Research Office of Charles Sturt University (CSU). The purpose of such an econometric tax model is that it allows APIWSA to engage with stakeholders using evidence-based assumptions as to the effect on the Vietnamese alcohol market on any possible taxation reform scenarios. These effects include impact on pricing; consumer responses to price changes and consumption levels; and changes to government revenues.
We evaluate the impact of the Spanish car scrappage programme introduced in May 2009 on short-run car purchases. The scrappage programme was simultaneously discussed and implemented and was therefore exogenous to the consumers. We analyse the effect of this programme on household new car purchase decision and household expenditures. The results show that the scrappage programme increased the probability of buying a new car but decreased the mean expenditure devoted to the purchase of this new vehicle. We also evaluate the effect of financial aid on household welfare. Our best estimate of the welfare gain related to the scrappage programme is very similar to the aid of €1000 offered by the public administrations.
Whitefish is one of the largest segments in the global seafood
market. The whitefish market includes traditional wild-caught
species; cod, pollock and Alaska pollock, and the more recent
introduction of aquaculture species; pangasius and tilapia. This
study specifically addresses price elasticity estimates for wild and
aquacultured whitefish on the German market. For demand
estimation, the general form of the Almost Ideal Demand System
(AIDS) with linear approximation (LA) is used. The demand for
whitefish on the German market is found to be relatively elastic.
The uncompensated cross-price elasticities indicate substantial
substitution between pangasius and the three wild species, yet
tilapia does not seem to be a part of the larger whitefish market
in Germany
http://www.tandfonline.com/eprint/6KhrXqxAvwF5xb3DtV9m/full
Although consumption is increasing, aquaculture is controversial in many countries because of the potential environmental impact, leading to substantial media coverage. In this article, we investigate the impact on demand for salmon in Norway with a single equation specification as well as a demand system. As Norway is a large salmon producer, the media coverage is highly varied. Our media coverage data can be broken down into 10 different categories, which vary from positive coverage such as cooking recipes to negative coverage of production problems such as disease. Our results indicate that in aggregate, the media coverage has little impact on demand for salmon. There are some indications that the positive coverage increases demand. There are also spillover effects relatively to other goods (cod, poultry and red meat). 2016
Structure in personal consumption is conceptualized as arising from need-based consumer objectives in the use of goods and services and the organization in consumer heuristics that these objectives imply. As used here, structure is taken to suggest that goods are grouped together in consumer heuristics on criteria not exclusively predicted by their physical properties. A need-based structure in personal consumption is tested in the complementarity and substitution between goods evidenced in the Consumer Expenditure Survey (CEX). The historical two category discrimination in essentials and non-essentials is extended to represent a category of semi-essentials in which goods have both function and signal with approximately equivalent weights. Results from estimation of a Quadratic Almost Ideal Demand System over a study period following a structural break in the complete data series generally support the proposed structural differentiation of consumption goods and services.
Στην εργασία αυτή αναλύονται τα καταναλωτικά πρότυπα όσον αφορά τη ζήτηση τροφίμων στην Ελλάδα κατά την περίοδο 1960-1995. Για τους σκοπούς της εργασίας χρησιμοποιείται μια μορφή του δυναμικού υποδείγματος AIDS που ικανοποιεί παραμετρικά την ιδιότητα της προσθετικότητας. Το σχετικό οικονομετρικό υπόδειγμα διορθώθηκε για αυτοσυσχέτιση πρώτου βαθμού χωρίς να παραβιάζεται η ιδιότητα της προσθετικότητας.
This study uses Almost Ideal Demand System (AIDS) to estimate the demand function for meat (beef, chicken and mutton) in case of Pakistan. Own-and cross-price elasticities are computed. The elasticities are inelastic in all cases while expenditure elasticities of chicken and mutton are greater than one. On the basis of elasticities estimates, chicken and mutton can be regarded as luxury goods while beef is a normal good due to its low expenditure elasticities. Cross price elasticities show substitutability among beef, chicken and mutton.
This paper represents static and dynamic specification of the Almost Ideal Demand System (AIDS) based on co integration techniques and error correction models. Based on Iranian urban-area's household expenditure data over the period 1984-2004, it was found that the proposed formulation for dynamic specification performs well on both theoretical and statistical grounds as the theoretical properties of homogeneity and symmetry are supported by the data. Moreover, with computing shortrun and long-run elasticites, it was fund food; clothing and housing are complements, regardless of time horizon.
In the last two decades, the consumption of meat was subject to characteristic changes. An increasing popularity of take-away-food, the trend to convenience foods, food scandals, the BSE-crisis etc. influence consumer behaviour. Using a demand analysis, the determinants of demand for meat and fish were investigated. In addition to income and prices, the influence of BSE-media coverage was analysed. Between 1990 and 1998, a significant effect of the BSE-media coverage on the consumption of meat and meat products was observed. The results point out that memory processes are relevant with regard to the BSE crisis.
Purpose
– The purpose of this paper is to investigate market competition for three product types of salmon (smoke, fresh and whole salmon) to understand whether supermarkets are exercising market power over salmon consumers in the UK retail market.
Design/methodology/approach
– Competition and the corresponding pricing conduct among supermarkets are tested by applying dynamic structural simultaneous system equations and using similar data set used by Jaffry et al. (2003).
Findings
– The results indicate that the market is competitive for fresh fillets and whole salmon but retailers appeared to exert some level of market power for smoke salmon. The hypothesis that market power is the same for all three products in the study was rejected; further indicating that the market for fresh products are competitive while retailers may be exercising market power over consumers for smoke salmon.
Research limitations/implications
– Current data limitations did not allow the investigation to cover the past few years in the modelling process. However, the results are still relevant as there have been no major structural changes in aquaculture products retailing landscape in the recent past.
Practical implications
– Concerns over the supermarkets’ exercise of market power over consumers have prompted the competition authorities to continue investigating the situation in the UK supermarket sector since 1996. The most recent investigation by competition authorities was in 2006. In all cases, no evidence of market power was found despite increased market concentration. Results from this study generally uphold the claim of the competition authorities in the UK.
Originality/value
– This is the first study to use a model within a structural econometric framework of firms to test for competitiveness of salmon products in the UK market place.
A mixed effects model is used to estimate intercepts, price and expenditure elasticities for vegetables, meat and fish in
different cohorts. Results from Wald tests reveal that intercepts for fish are higher for older cohorts than for younger cohorts,
and expenditure elasticities for meat are higher for older cohorts than for younger cohorts. The implication is that over
time, when younger cohorts replace older cohorts, the total expenditure share for fish is likely to decrease contributing
to a negative trend in fish consumption. For meat, the total expenditure elasticity is likely to decrease.
El objetivo fue estudiar el consumo de diferentes cortes y tipos de carnes por los hogares uruguayos en la última década del siglo XX y primera del siglo XXI. Se utilizaron las dos últimas encuestas de gastos e ingresos de hogares aplicando un procedimiento bietápico a un sistema incompleto de demanda con ecuaciones censuradas. El estudio involucró trece productos cárnicos: seis de carne bovina, uno de ovina, uno de porcina, uno de aviar, uno de pescados y mariscos y tres productos cárnicos genéricos. Se computaron elasticidades ingreso y precio con un intervalo de confianza 90%. Los resultados verificaron una disminución en el consumo de todas las carnes, particularmente de la bovina, entre ambos períodos. No obstante, éstas continúan siendo un elemento preponderante en la dieta hogareña. La carne aviar mejoró sustancialmente su consumo relativo aunque los fiambres y embutidos consolidaron su preferencia. Entre las bovinas, se destacó la carne picada. El ingreso y tamaño de los hogares mostraron un efecto positivo sobre la probabilidad de consumo de casi todas las carnes, las que se comportaron siempre como bienes necesarios y normales. En general, todas se mostraron inelásticas frente al ingreso y reaccionaron en forma diferencial frente a cambios en su precio.
The paper rationalizes certain functional forms for index numbers with functional forms for the underlying aggregator function. An aggregator functional form is said to be ‘flexible’ if it can provide a second order approximation to an arbitrary twice diffentiable linearly homogeneous function. An index number functional form is said to be ‘superlative’ if it is exact (i.e., consistent with) for a ‘flexible’ aggregator functional form. The paper shows that a certain family of index number formulae is exact for the ‘flexible’ quadratic mean of order r aggregator function, defined by Den and others. For r equals 2, the resulting quantity index is Irving Fisher's ideal index. The paper also utilizes the Malmquist quantity index in order to rationalize the Törnqvist-Theil quantity indexin the nonhomothetic case. Finally, the paper attempts to justify the Jorgenson-Griliches productivity measurement technique for the case of discrete (as opposed to continuous) data.
Demand systems estimation increasingly makes use of household-level microdata, mainly to measure the effects of demographic variables. Data based on these household-expenditure surveys present a major estimation problem. For any given houshold, many of the goods have zero consumption, implying a censored dependent variable. Techniques which do not take this censored dependent variable into account will yield biased results. We utilize a censored regression approach that is computationally simple, consistent, and asymptotically efficient. The results are then presented and compared with those obtained using an uncensored technique.
This article presents an analysis of the demand for dairy products. First, the structure of dairy product demand is estimated
using the Household Food Consumption Survey data. Under the assumption of a two-stage budgeting procedure, a complete demand
system for food incorporating demographic effects is estimated. Next, using the demand relations estimated from cross-section
data, prediction interval tests utilizing time-series data are performed for milk and butter. Last, factors affecting consumption
are classified into economic and demographic effects and a decomposition of the causes of changes in demand over time is performed.
In the literature, a variety of approaches have been used to calculate demand elasticities in almost ideal demand system (AIDS) models of demand. It is common to estimate the linear approximate almost ideal demand system (LA/AIDS) instead of the AIDS. When the LA/AIDS is estimated, all of the previously reported approaches to compute elasticities are theoretically incorrect. This paper presents correct formulas for LA/AIDS elasticities and illustrates the potential errors from using incorrect computing formulas.
Linearizing the Almost Ideal Demand System (LAIDS) by recourse to the Stone share weighted price index is common practice. Two issues are addressed here. First, scrutiny of the errors-in-variables implications of the linearization reveals that, not only is the SUR estimator inconsistent, but a consistent IV estimator cannot be constructed. Second, some alternatives to the Green-Alston elasticities specifically designed for the LAIDS model are developed, but neither these nor the Green-Alston elasticities are found to have any advantages over the conventional elasticity formulae. Some errors in the Green-Alston (1990) paper are corrected. The inconsistency and elasticity issues are documented by a Monte Carlo investigation.
The almost ideal demand system (AIDS) model has many desirable theoretical properties but usually it is estimated using a linear approximation. The quality of the approximation to the true AIDS depends on the parameters and the collinearity among the exogenous price variables. In the literature, four alternative formulas have been used to compute elasticities of a demand system that is assumed to be of the AIDS form using parameters estimated in the linear approximate AIDS. Month Carlo experiments indicate that two of those four alternatives, as typically applied, are highly inaccurate but the other two are quite accurate. Copyright 1994 by MIT Press.
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.
This study analyzes U.S. consumer budget allocations among 11 aggregate commodity groups for the period 1948-78. Also budget allocations among four food groups are analyzed for this same period. Several alternative model specifications are analyzed. Emphasis is given to the Deaton-Muellbauer (1980a) "almost ideal demand system." A dynamic version of their model is developed and quantified. Comparison of the static and dynamic formulations are compared with similar specifications for the "linear expenditure system." The predictive performance of these four models for the 11 commodity groups is tested for the sample period (1948-78) and for the years 1979-81. The purpose of this study was to develop improved methods for analyzing demand relationships for food and other goods. The results for the dynamic or habit formation specifications appear promising, although no completely satisfactory results for all goods are claimed.
The Stone index typically used in estimating linear almost ideal demand systems is not invariant to changes in units of measurement, which may seriously affect the approximation properties of the model. A modification to the Stone index, or use of a regular price index instead, are both desirable practices in estimating linear AI models.
We derive a general elasticity representation of the necessary and sufficient conditions for direct weak separability of the
utility function. Parametric restrictions required to implement the separability conditions are presented for three common
demand systems: the Almost Ideal, Translog, and Rotterdam. Our empirical application uses the Rotterdam model to test a few
separable structures within a complete U.S. demand system emphasizing food commodities. Results, based on size-corrected likelihood
ratio tests, provide support for commonly used separability assumptions about food and meat demand.
This paper shows that the commonly used Stone index approximation can bias the parameter estimates of the almost ideal demand system. The bias mostly affects the price parameters and can be more serious when the budget share equations are estimated with individual household rather than aggregate data. In the absence of strong substitution effects, the price parameter bias can be largely corrected through simple reparameterization. Copyright 1993 by Royal Economic Society.
Ever since Richard Stone (1954) first estimated a system of demand equations derived explicitly from consumer theory, there has been a continuing search for alternative specifications and functional forms. Many models have been proposed, but perhaps the most important in current use, apart from the original linear expendi- ture system, are the Rotterdam model (see Henri Theil, 1965, 1976; Anton Barten) and the translog model (see Laurits Christensen, Dale Jorgenson, and Lawrence Lau; Jorgen- son and Lau). Both of these models have been extensively estimated and have, in addition, been used to test the homogeneity and symmetry restrictions of demand the- ory. In this paper, we propose and estimate a new model which is of comparable gener- ality to the Rotterdam and translog models but which has considerable advantages over both. Our model, which we call the Almost Ideal Demand System (AIDS), gives an ar- bitrary first-order approximation to any de- mand system; it satisfies the axioms of choice exactly; it aggregates perfectly over consumers without invoking parallel linear Engel curves; it has a functional form which is consistent with known household-budget data; it is simple to estimate, largely avoid- ing the need for non-linear estimation; and it can be used to test the restrictions of homogeneity and symmetry through linear restrictions on fixed parameters. Although many of these desirable properties are possessed by one or other of the Rotterdam or translog models, neither possesses all of them simultaneously. In Section I of the paper, we discuss the theoretical specification of the AIDS and justify the claims in the previous paragraph. In Section II, the model is estimated on postwar British data and we use our results to test the homogeneity and symmetry re- strictions. Our results are consistent with earlier findings in that both sets of restric- tions are decisively rejected. We also find that imposition of homogeneity generates positive serial correlation in the errors of those equations which reject the restrictions most strongly; this suggests that the now standard rejection of homogeneity in de- mand analysis may be due to insufficient attention to the dynamic aspects of con- sumer behavior. Finally, in Section III, we offer a summary and conclusions. We be- lieve that the results of this paper suggest that the AIDS is to be recommended as a vehicle for testing, extending, and improving conventional demand analysis. This does not imply that the system, particularly in its simple static form, is to be regarded as a fully satisfactory explanation of consumers' behavior. Indeed, by proposing a demand system which is superior to its predecessors, we hope to be able to reveal more clearly the problems and potential solutions asso- ciated with the usual approach. I. Specification of the AIDS
The almost ideal demand system is combined with the Fourier expenditure system. Subject to the assumption that preferences are of the price-independent, generalized-logarithmic class, the resulting demand system has the desirable features of each of its components. Aggregate demand equations are consistent with preferences of a representative consumer, and consistent estimates of elasticities are obtained for all observed prices. Application of the new demand system to U.S. consumption of meats and fish reveals that it fits the data well and that the restriction to the usual specification is rejected.
U.S. Consumer Behavior over the Postwar Period: An Almost Ideal Demand System Analysis Giannini Foundation Monograph No. 40, University of California, 1986. Buse, A. "Evaluating the Linearized Almost Ideal Demand System
- L A Blanciforti
- R D Green
- G A King
Blanciforti, L.A., R.D. Green, and G.A. King. "U.S. Consumer Behavior over the Postwar Period: An Almost Ideal Demand System Analysis." Giannini Foundation Monograph No. 40, University of California, 1986. Buse, A. "Evaluating the Linearized Almost Ideal Demand System." Amer. J. Agr. Econ. 76(No-vember 1994):781-93.
Demand Systems Estimation with Microdata: A Censored Re-gression ApproachThe Demand for Dairy Products: Structure, Prediction and Decomposition
- D Heien
- C R Wessells
Heien, D., and C.R. Wessells. "Demand Systems Estimation with Microdata: A Censored Re-gression Approach." J. Bus. and Econ. Statist. 8(July 1990):365-71. ?. "The Demand for Dairy Products: Structure, Prediction and Decomposition." Amer. J. Agr. Econ. 70(May 1988):219-28.
Consumer Behavior over the Postwar Period: An Almost Ideal Demand System Analysis
- L A Blanciforti
- R D Green
- G A King
Blanciforti, L.A., R.D. Green, and G.A. King.
"U.S. Consumer Behavior over the Postwar
Period: An Almost Ideal Demand System
Analysis." Giannini Foundation Monograph
No. 40, University of California, 1986.