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Units of Measurement and the 'Stone Index' in Demand System Estimation
Abstract
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.
... However, although Deaton and Muellbauer [30] proposed the use of the sStone price index to linearize the AIDS, some authors seee.g. Buse [62], Buse and Chan [70], Moschini [71], and Pashardes [72] ascertain that estimation using Equation (6) leads to empirical inconsistencies and biased results. Furthermore, since the Stone price index includes current budget shares, they appear on both the left-and right-hand sides of the estimated share equation, resulting in a correlation between the income variable and the disturbance term [64]. ...
... Moschini [71] and Barnett and Seck [29] suggest the use of alternative price indices in the linear estimation of the AIDS such as the Laspeyres price index which is specified as: ...
... Where w i0 and p i0 are expenditure shares and prices in a base period. However, Moschini [71] notes that since the weights of w i0 of the Laspeyres price index in equation (7) are constants and only invariance up to a multiplicative constant is required, a simplified version of the price index can be specified as follows: ...
Short- and long-run price and income elasticities are generally unavailable at the regional level for major imported food groups for the Caribbean. These elasticity measures are needed to enhance policymaking. This paper therefore seeks to determine the income, own-price and cross-price elasticities of eight major imported food groups. This will show the relationships between income and price changes on the import quantities for the
major food groups. This was done using an error-corrected linear approximate almost ideal demand system (EC-LA-AIDS) for the period 1961–2021, using annual data. The study found that the theoretical restrictions of homogeneity and symmetry did not hold in the static LA-AIDS model but did in the EC-LA-AIDS model. The
speed of adjustment parameter in the EC-LA-AIDS model revealed that imported beverages had the slowest adjustment to long-run equilibrium while all other imported food categories had a moderate adjustment speed. The study also derived short- and long-run income and price elasticities of import demand for the eight imported food categories. In both time horizons, income elasticities revealed that all imported food categories were normal
goods. In both time horizons, imported meat and seafood, and sugar and honey were the most responsive to changes in income, while spices and tea was the least responsive. Own-price elasticities revealed that all imported food categories were import price inelastic except for meat and seafood which was found to be import
price elastic in both time horizons. Additionally, cross-price elasticities unveiled various substitution and complementary relationships between pairs of imported foods. The study not only contributed empirical insights into
the import demand dynamics of the Caribbean, but also emphasized significant policy implications arising from
the research findings.
... Another solution is an econometric estimation by the Three-Stage Least Squares (3SLS) method (Alston et al. 1994;Buse and Chan 2000). However, as the Stone price index makes the estimated parameters inconsistent (Moschini 1995;Buse 1994), the use of this index seemed to be inappropriate. Furthermore, as the Stone price index is not invariant to changes in the units of measurement which is undesirable, Moschini (1995) proposed several other price indices. ...
... However, as the Stone price index makes the estimated parameters inconsistent (Moschini 1995;Buse 1994), the use of this index seemed to be inappropriate. Furthermore, as the Stone price index is not invariant to changes in the units of measurement which is undesirable, Moschini (1995) proposed several other price indices. The Moschini-corrected Stone price index in the LA-AIDS is given by: ...
... where, is the Kronecker delta holding a value of unity (=1) for = (own-price elasticities) and zero (=0) for ≠ (cross-price elasticities). Hicksian (compensated) price elasticities ( ) can be derived from either Hicksian (compensated) demand functions or by inserting the expenditure elasticity and Marshallian price elasticity in the Slutsky equation in the elasticity form (Deaton and Muellbauer 1980;and Moschini 1995 ...
The primary objective of this study is to investigate the food demand responsiveness in Bangladesh. More specifically, applying the Stone Price Index to an Almost Ideal Demand System (AIDS), this paper estimates income (or, expenditure) and price elasticities of demand for ten composite food products in Bangladesh; namely, Cereals, Fish, Meat, Pulses, Edible oil, Milk, Vegetables, Fruits, Spices, and Other foods. The study utilizes data from the Household Income and Expenditure Survey including the most recent one of 2016, undertaken by the Bangladesh Bureau of Statistics.
An empirically based demand system can numerically inform a variety of simulation models in projecting future food demands in Bangladesh. As such, the up-to-date estimates of demand responsiveness are expected to help Bangladeshi policymakers understand the impact of some exogenous price and/or income ‘shocks’ as well as in formulating pragmatic and effective food and agricultural policies, fiscal and financial stimulus packages, among many others.
The results reported and analyzed in this paper seem to suggest that, in Bangladesh, a representative household regards Fish, Meat, Fruits, and Spices as luxury food products, each with an estimated expenditure elasticity value of greater than unity. This implies that as the economy of Bangladesh keeps on growing, leading to an ever higher per capita household income, the economy will likely witness some structural shift in food demand—in particular, households will increasingly spend a higher proportion of its food budget on the protein-rich, more balanced food basket involving fish, meat, fruits and spices.
However, all composite food products are estimated to be price inelastic regardless of the household being compensated and uncompensated for any price hike. Furthermore, the estimated cross-price elasticities appear to suggest no strong substitution happening across various product groups, lending support to the hypothesis of ‘separability in consumption’ at a reasonable high level of commodity aggregation. Comparing with the previously estimated elasticities available in the literature, the new estimates for the composite food products (except for Meat) seem to fall within the historical range of estimated values.
Keywords:
AIDS model, Food demands in Bangladesh,
Own- and cross-price elasticities,
Expenditure elasticities, Separability,
Generalized Composite Commodity Theorem,
Commodity aggregation.
... (3) but the use of stone's price index causes a problem of simultaneity in the model because, the budget share (w i ) serves as both dependent and independent variable in the model (Eales and Unnevehr, 1988;and Moschini, 1995). Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). ...
... (3) but the use of stone's price index causes a problem of simultaneity in the model because, the budget share (w i ) serves as both dependent and independent variable in the model (Eales and Unnevehr, 1988;and Moschini, 1995). Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). According to (Moschini, 1995) the Laspeyres price index is specified as: ...
... Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). According to (Moschini, 1995) the Laspeyres price index is specified as: ...
This paper estimates a complete demand for meat products in Ghana using a Linear Almost Ideal Demand Systems. The expenditure and price elasticities of demand are estimated for six meat products. Expenditure endogeneity and truncated expenditures are controlled in the estimation process using the "Augmented Regression Approach" and Heckman two-stage procedure respectively. Symmetry and homogeneity conditions are rejected at 1% significance level in the unconstrained LA/AIDS model. Results indicate that beef is the most frequently purchased meat product in Ghana as well as having the highest mean quantity (23.89 kg) of meat consumed and constitute about 52% of meat budget. Mutton and chevon have the strongest substitution relationship. The marginal expenditure elasticity indicates that about 70% of future meat budget of Ghanaian households will be spent on beef and chicken.
... (3) but the use of stone's price index causes a problem of simultaneity in the model because, the budget share (w i ) serves as both dependent and independent variable in the model (Eales&Unnevehr, 1988;and Moschini, 1995). Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). ...
... (3) but the use of stone's price index causes a problem of simultaneity in the model because, the budget share (w i ) serves as both dependent and independent variable in the model (Eales&Unnevehr, 1988;and Moschini, 1995). Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). According to (Moschini, 1995) the Laspeyres price index is specified as: (4) Where is the geometric mean budget share of the i th commodity. ...
... Following Moschini (1995), a Laspeyres price index is used to substitute for the Stone's Price index in (3). According to (Moschini, 1995) the Laspeyres price index is specified as: (4) Where is the geometric mean budget share of the i th commodity. Substituting equation (3) ...
The paper analyses the effects of food price inflation on Ghanaian households using GLSS-5 household data. Expenditure endogeneity and truncated expenditures were controlled in the estimation process using the "Augmented Regression Approach" and Heckman's two-stage procedure, respectively. Symmetry and homogeneity conditions were rejected in the unconstrained LA/AIDS model. The study reveals that cereals and bread; fish; vegetables; and roots and tubers will continue to constitute important share of Ghanaian food expenditure as they collectively constitute 67% of future food expenditure. Food price inflation between 2005 and 2011 has eroded real household food purchasing power by 47.18%.
... There are two basic functional forms of AIDS model, i.e., linear and quadratic based on the specification of price index in Equation (2). The estimated results will be similar in two functional forms and the linear model will approximate the nonlinear one, provided that measurement errors are taken into account during the estimation process (Moschini, 1995;Moschini & Vissa, 1992). Therefore, we choose to apply the linear AIDS model for estimating our demand system. ...
... 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). ...
... 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.
... La simetría se cumple si: = El modelo AIDS tiene las siguientes propiedades: a) es una aproximación de primer orden a cualquier sistema de demanda derivable; b) satisface los axiomas de la preferencia; c) agrega sobre los consumidores; d) tiene una forma funcional consistente con los datos del gasto familiar y; e) es una representación flexible de cualquier sistema de demanda arbitrario, (Moschini, 1995). ...
... Para estimar los parámetros de las elasticidades precio propias Marshallianas (εij), las Hicksianas (δij) y del gasto (ηi), se utilizan las siguientes expresiones, (Moschini, 1995): ...
p class="Default">Turkey meat is a white meat demand in Mexico, however, its consumption is still low. In order to explore the convenience of expanding the market and foresee if the industry should compete in price or expenditure, the aim of this work is to study the demand for turkey meat as part of a protein basket; that consists of beef, chicken, pork and egg. Methodologically an almost ideal demand model was used, in an economic sense, this model allows an optimal assignment representation through budget share equations as a function of prices and real expenditure within the bundle. With statistical information from secondary sources, the results showed that the demand for turkey meat responds inelastically to price, and that the response on spending is almost one. With the estimates of price and expenditure growth rates, in terms of an expansion policy in the turkey market, results conclude that spending is the most relevant factor in demand, followed to a lesser extent by price.</p
... 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). ...
... 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). By replacing a mean budget share i w by w i Equation 1, generates the log-linear analog of the Laspeyres price index. ...
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.
... P t is sensitive to the units of measurement for prices and quantities, which may seriously affect the approximation properties of the model (Moschini, 1995). Two alternatives to the Stone price index are the log-linear analogue of the Paasche price index ( ) P t P and the log-linear analogue of the Laspeyres price index: ...
... This suggests that the results are sensitive to the price index used. We prefer the Laspeyres index for the reasons given in Moschini (1995), and the endogeneity issue arising from the use of Stone price index.. ...
This study estimates the combined direct and indirect rebound effects from energy efficiency improvements in the delivery of six energy services to UK households, namely: heating; lighting; cooking; refrigeration and clothes washing; entertainment and computing; and private vehicle travel. We use a unique database on the price and quantity demanded of these energy services over the past half century.
We estimate a two-stage almost ideal demand system for household expenditure, using these energy services as expenditure categories. We estimate rebound effects in terms of carbon emissions and only include the ‘direct’ emissions associated with energy consumption. Our results suggest direct rebound effects of 70% for heating, 54% for private vehicle travel and ∼90% for the other energy services. However, these effects are offset by negative indirect rebound effects—that is, indirect rebounds contribute additional emission savings. As a result, our estimates of combined rebound effects are generally smaller, namely 54% for lighting, 55% for heating, 41% for refrigeration and clothes washing, -12% for entertainment and computing, 44% for cooking and 69% for vehicle travel. We also find some evidence that rebound effects have declined over time. We provide some important caveats to these results, and indicate priorities for future research.
... and are i p i u parameters, is the price of characteristic j, x F is the total expenditure allocated to football match characteristics (the price of the ticket), i.e. the outlay (expenditure) of the football branch using King's (1976) terminology 4 , P is a price index approximated by the following geometrically weighted average of prices as proposed by Moschini (1995): ...
... The utility function is assumed to be weakly separable, considering "football" as one of the branches, which is compatible with a kind of two decision process(King, 1976).5 In his paperMoschini (1995) suggests caution in using the traditional Stone index(Stone, 1954), which suffers a units of measurement problem that translates into potential biases in the estimated elasticities.6 The total number of matches in those seasons was 1140, but some missing data problems reduced the sample to 1124. ...
We estimate a system of demand equations for three aggregate characteristics of a football game—quality of the teams, outcome uncertainty, and schedule—based on the estimation of a hedonic price model for the ticket price of a football match using data from the Spanish football league. We conclude that all three characteristics are not inferior goods (quality as a luxury), and they are price inelastic, showing some degree of complementarity. Some implications of these results in terms of the measures taken and to be taken by the Spanish association of football clubs (LaLiga) are discussed.
... The presence of the informational shift variables s in Equation (6) presents a difficult problem when estimating w. We represent w using the corrected Linear Approximate Almost Ideal Demand System (LA-AIDS) model [11,20]. The expenditure share ( ) for the i th frozen seafood product, is given by ...
... where the usual unobservable, nonlinear AIDS price index is replaced by the loglinear analog of the Laspeyres price index for constant base period shares [20]. It is given by ...
The present study addresses the impact of the Deepwater Horizon event on the U.S. frozen fish and shellfish markets. Given a demand system approach, trends in consumption were carefully measured and tested while controlling for own price, cross price, and conditional expenditure effects as well as autocorrelation. Consumption trends beginning the first week of the data set were unaltered by the event. Moreover, the effect of the event was not statistically significant in either demand system. The aggregate national data for the grocery store distribution channel, which includes mostly imported seafood and some domestic aquaculture-sourced seafood, likely contributes to these findings of lack of avoidance behavior.
... The geometric stone price index can affect calculations in the AIDS model, and this is due to the non-invariant change in units of measurement Moschini (1995) in Rifin (Rifin, 2013). So Moschini suggested that in order for the stone price index to be corrected using the log-linear version of the Laspeyres index as follows: ...
... X is the per capita expenditure on all food commodity groups competed in equation (4) as [29][30][31]: ...
The analysis of food consumption pattern is a primary concern of any developing country because it is related with food security. Pakistan is one of the emerging nations of the developing world.Due to the similarities and differences in households' food consumption behavior, income distribution, the effects of alternative tax structures, cost-benefit analyses, and the choice of cost of living index, the study of households' food consumption pattern is crucial for a developing nation like Pakistan. Furthermore, for Pakistan's food security in the present and the future, an analysis of food consumption pattern is crucial. The main objective of this study is to analyze the households' food consumption pattern. Linear Approximation Almost Ideal Demand System (LA/AIDS) is applied using data from Household Integrated Economic Survey (HIES) for the year 2018–19. This study makes a significant contribution by estimating household age composition elasticities, which were absent from earlier studies. Results from the income elasticities reveal that milk, meat, and fruits are luxuries food items. Similarly, on the basis of inelastic income elasticities we declared cereals, pulses, vegetables, sugar, and ghee as necessity food items. Results from the compensated own price elasticities show that the eight food commodity groups have inelastic own-price elasticities. This implies that these food commodities are integral food items of household diet. Results from the compensated cross-price elasticities shows that cereals and pulses, cereals and vegetables, pulses and vegetables, milk and fruits, meat and fruits, and milk and ghee are gross substitutes. On the other hand, pulses and meat, pulses and fruits, and ghee and meat are gross complements. According to the findings of the household age composition elasticities, adding children to a household significantly increases its sugar consumption while significantly reducing its fruit consumption. Any increase in the size of the household by an adolescent, adult, or a person in their middle age results in a significant increase in the consumption of cereals and a significant drop in the consumption of fruits. Finally, any increase in the size of the households brought about by an elder resulted in a significant rise in the consumption of cereals and a significant drop in the consumption of vegetables.
... Therefore, a replacement for the quantity index previously defined that does not rely on unknowable parameters such as Stone's quantity index, would be useful and would allow us to linearise the system. In this regard, to simplify and give an index invariant to units of measurement, Moschini (1995) suggests that a geometric index with fixed weights (here historical averages) replace lnQ, giving a Divisia volume index: lnQ t = ∑ M i=1 w 0 i lnQ i .D k = dummy variable for quarters of the calendar year, k = 2, 3, 4, and ln denotes natural logarithm. ...
... In the diary records method that was used to collect UNHS data, many zero expenditures are reported. The problem of zero expenditure has to be dealt with because if one includes zero observations in an econometric estimation without special treatment, this would lead to biased and inconsistent estimators (Intriligator et al., 1996). To treat the problem, the Generalized Heckman Procedure that was proposed by Heckman (1979) is applied. ...
... 4 As the AIDS price index is not linear in its parameters, Deaton and Muellbauer (1980a) suggest the Stone index, to obtain a linear model. However, Moschini (1995) proves that this index is not invariant to changes in prices and quantities, and suggests the corrected Stone index and the Laspeyres index as substitutes. 5 I also applied the procedure of Blundell and Robin (1999) to correct the expenditure endogenity, due the separability assumption. ...
This paper aims to analyze the thin subsidies effect on nutritional status and individual food acquisition for individuals in poverty between 2 and 9 years old. With the data of a Brazilian family budget survey, I estimated a model that identifies the individual consumption of calories, based on aggregate household consumption, followed by the estimation of a child health production function, which verifies the effect of a set of variables on Body Mass Index (BMI). Finally, I estimated the children's food demand system for various food categories (healthy and unhealthy). I found that the implementation of thin subsidies can be effective for the variability of healthy food destined to children, contributing significantly to the joint increase in food consumption that reduced prices (fruits, vegetables, fish and milk). However, only the variation in the amount of fruit suffers a variation that is more than proportional to the 20% variation in the price of the selected basket. The discount increases unhealthy food consumption (ultraprocessed and soft drinks) due to the complementarity relationship. Thereby, the combined discount granted to a healthy food basket increases the average total caloric intake. This intervention does not reverse the process of average BMI growth of economically vulnerable children and, consequently, it could not reduce the incidence of childhood obesity. In general, the analysis proposed was essential to understand how specific policy interventions can encourage healthy habits, giving attention to their impacts on vulnerable individuals. Children nutritional status. Children food demand system. Thin subsidies.
... The P is Stones Price Index for aggregate food. This Stones Price Index was corrected for units of measurement invariance following Moschini (1995) approach shown in Equation 2; ...
This study examines Kenya’s demand for selected roots and tubers (R&Ts). Data used for the analysis were collected from Nakuru Town East Sub-County. A sample unit of 385 urban households was interviewed at the market outlet immediately after purchasing R&Ts. Linear Approximated Almost Ideal Demand System (LA/AIDS) model was used to estimate demand elasticities, demographics and social-economic factors influencing the consumption patterns of R&Ts. Age, education, household size, and proportion of household members statistically and significantly explained the variations in R&Ts consumption patterns. Empirical results showed negative own-price elasticities for uncompensated and compensated demand analyses, therefore in line with utility theory. Cross-price elasticities had positive and negative signs, indicating the presence of substitutes and complements respectively among R&Ts. Expenditure (income) elasticities for R&Ts had mixed signs ranging from elastic to inelastic. Irish potato and sweet potato were inelastic with a positive sign classifying them as necessities goods. Cassava and yam were inelastic with a negative sign indicating they were inferior goods, while arrowroot was positive and elastic, therefore a luxury good. These results are broadly consistent with microeconomic theory; consequently, they could inform the formulation of effective policies and strategies that promote R&Ts consumption thereby contributing to food and nutritional security among households.
... The GCCT (Lewbel 1996) relaxes the assumption of perfect collinearity of prices within a group. Let the relative price be defined as the ratio of the price of good i to a price index, where we follow Xie and Myrland (2011) and Moschini (1995) and use a loglinear Laspeyres type price index P Index according to the following function: ...
In a marine multi-species environment, consumers’ decisions may introduce interactions between species beyond biological ecosystem links. The theoretical literature shows that consumer preferences for variety can trigger a sequential (local) extinction of fish stocks. However, consumer preferences are not yet fully understood empirically, as it is uncertain how variety-loving consumers really are, in particular in specific settings such as in developing countries. In this article, we present an aggregation procedure to study consumer preferences in a highly diverse marine system. In a first step, we use co-integration analysis and aggregation theorems by Hicks and Lewbel to find groups of species that consumers find substitutable. In a second step, we use a direct quadratic almost ideal demand system (QUAIDS) to estimate price elasticities between these groups. We then quantify and compare welfare losses and spillovers from species-specific price shocks that may for example result from restoration efforts. Our case study from Senegal across 28 species reveals evidence that consumers do indeed have a preference for diversity of species on their plates.
... However, the stone price index is not invariant to change in units of measurement (Moschini, 1995). He suggested employing the corrected stone price index from a log-linear version of the Laspeyres index as follow: The LA/AIDS model for coconut crude oil import in the Netherlands uses the corrected stone price index as follows. ...
Despite Indonesia being the world’s largest coconut-producing country, the competitive position of coconut crude oil (CCO) is still weak in the international market. Indonesia should determine a potential market that plays a significant role in the coconut oil industry. The market share and elasticity of demand for Indonesian CCO in the primary market are controvertible in its policies. This study aimed to analyze the Indonesian competitive position in Germany - using the LA/AIDS model. Monthly time series data spanned values and quantities of CCO imported by Germany from 2004 to 2019. The main findings are that Indonesia had a strong market position. As a result of higher own-price elasticity, Indonesia is more sensitive to its price change. There is a weak competitive relationship between Indonesia and the Philippines since the cross-price elasticity is inelastic. Moreover, quantity demand for Indonesia will be higher due to the higher expenditure elasticity.
... This stone price is 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 the use of price index and since the felled that it may lead to introduction of measurement errors; in spite of the fact stone price is used. ...
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.
... where w iht is the expenditure share of meat group i = 1 (poultry), 2 (pork), 3 (beef&veal), 4 (mixtures), for household h in period t; p jht is the price of product group j, M ht a household's total meat expenditure, α i , γ ij , and β i are parameters to be estimated, and υ iht denotes the error term. P ht is the price index and we used a linear approximation of the AIDS by employing the corrected Stone-Laspeyres-type price index suggested by Moschini (1995), which is given by ...
This paper assesses the effect of different meat tax designs in Germany including increasing the value-added tax as well as two climate-gas-emission-sensitive excise tax scenarios. For the simulation study, we first estimate price and expenditure elasticities for fresh meat for different household types using data from the GfK ConsumerScan FreshFood panel over the period 2012–14. The estimated elasticities are used to derive budget and welfare effects for the tax scenarios. A general rise in the value-added tax from 7% to 19% leads to a welfare loss of 0.83 euros per household per month. Disentangling the effect by household group according to income and age shows that low-income and older households experience a higher welfare loss and bear a larger tax burden relative to their income compared to low-income and younger households, respectively. Comparing the different taxation scenarios highlights the comparative efficiency of excise taxes and the importance to consider effects on older households.
... ). 7 Como o índice de preços do AIDS não é linear nos parâmetros,Deaton & Muellbauer (1980b) sugerem o índice de Stone, a fim de se obter um modelo linear. No entanto,Moschini (1995) prova que esse índice não é invariante a mudanças de preços e quantidades, sugerindo como substitutos o índice de Stone corrigido e o índice de Laspeyres.8 Também foram incluídas como controle as variáveis que representam as características da mãe: se é responsável pelo domicílio, se é obesa e sua escolaridade, bem como se o domicílio é urbano e se o responsável avalia que os alimentos consumidos no domicílio são sempre do tipo preferido. ...
Este estudo analisou o efeito do Programa Bolsa Família (PBF) sobre o estado nutricional e aquisição individual de alimentos, para crianças em situação de pobreza. Para tanto, com os dados da POF/IBGE, estimou-se um modelo que identifica a aquisição individual de calorias, por meio da aquisição agregada domiciliar, seguido pela estimação de uma função de produção de saúde infantil, por regressões quantílicas, que verifica o efeito de um conjunto de variáveis, incluindo a aquisição calórica e a participação no PBF, sobre a distribuição do indicador de estado nutricional utilizado (IMC), e por fim, um sistema de demanda para alimentação infantil, que permitiu a obtenção de variações nas quantidades de alimentos alocadas para crianças, dada a participação no programa. De forma geral, a análise proposta foi importante para entender como intervenções políticas específicas podem contribuir para incentivar hábitos saudáveis, dando atenção aos seus impactos sobre indivíduos vulneráveis.
... Note that a country c's absolute price index from the weighted least squares regression can be interpreted as a weighted geometric average (or Stone index), i.e.q k i,c,t = exp(θ k i,c,t ) = exp( m∈i w k m log r k m,c,t ), with w k m as fixed sales weights (e.g. Moschini, 1995). In our analysis below, we will also report on a disaggregate approach with prices for individual products m, r k m,c,t , and alternative assumptions on how to cope with missing observations of individual products. ...
Did the Internet make international markets more integrated? To address this question, we study long-term international price differences and their speed of convergence, based on a unique data base for identical goods sold in both online and traditional “brick-and-mortar” distribution channels, covering ten European countries. We find that long-term international price differences are closely comparable between both distribution channels. Furthermore, international price differences converge only slightly faster online than offline, and the differences in the international price differences between online and offline converge at a very fast rate. Finally, regardless of the distribution channel, long-term price differences are lower and converge faster within the same currency union. Our findings imply that online markets are currently not more integrated than traditional markets.
... Para la estimación de los parámetros se empleó el método de regresiones aparentemente no relacionadas (sur, por sus siglas en inglés Seemingly unrelated regressions) con las restricciones de simetría y homogeneidad y simetría impuestas (Moschini, 1995). ...
The fruit subsector is an important activity in the Mexican agricultural sector. In 2017 agri-food exports were 32,583 million dollars with a parity of 19.03 pesos per dollar of which avocado (Persea americana spp), grape (Vitis wine spp), mango (Manguifera indica spp), lemon (Citrus latifolia tanaka spp) and watermelon (Citrullus lanatus spp) represent a percentage of 40%. This fruit basket is analyzed with an Almost Ideal Demand System (AIDS) in order to estimate the elasticities of the selected export fruits; the expected changes in demand were estimated with a change in the peso/dollar ratio and a imposed 25% tariff. The parameters in the model were estimated with the restrictions of homogeneity and symmetry; all of them were significant at 5%, and there was no autocorrelation at 5%. The Marshallian and Hicksian price elasticity of demand, the cross elasticity and the expenditure elasticity obtained were consistent with their specific values, classifying the analyzed fruits as inelastic goods. In a scenario of 25% tariff imposition, the exported volumen to the US of avocado, lemon, mango, watermelon, and grape would decrease by 11, 10, 5, 6, and 3% respectively. Similarly, in an exchange scenario (peso/dollar) impact will be favorable of 14, 12, 6, 7 and 3% for the fruits analyzed in this basket of goods. If the T-Mec agreements are maintained, the exports of duty-free mexican fruits wil improve and the economy will mantain a surplus in this sector.
... However, Pashardes (1993) demonstrated that the Stone index in the AIDS model introduces an omitted-variable problem. Moschini (1995) argued against the Stone index since it does not possess the properties usually required in index number theory. Instead, Moschini suggested using a standard index like Laspeyre's, Paasche's or Törnqvist's. ...
An almost ideal demand system for long-term care is estimated using data from Norway, where the split of long-term care between home care and care in nursing homes is determined by municipalities. Previous literature has barely addressed what determines municipalities’ or other organizations’ allocations of resources to the sub-sectors of long-term care. The results show that home care is a luxury, while nursing home care is a necessity with respect to total expenditures on long-term care. Municipalities respond to high unit costs for home care by reducing that type of care. Municipalities are highly responsive to variations in the need for the two types of care and seem to provide a well-functioning insurance mechanism for long-term care. In the previous empirical literature, municipalities’ role as providers of insurance against the consequences of disabilities and frailty has received scant attention.
... Because concavity restrictions can be unduly restrictive as highlighted by Millimet and Tchernis (2008), we impose concavity locally at the mean share. Our approach imposes curvature using a statistical approach that contrasts with building the curvature property into the model in the manner of, for example, Ryan and Wales (1998) and Moschini (1995) who drawing on work by Diewert and Wales (1987) reparameterise the model such that its Slutsky matrix is constrained to be negative semi-definite. ...
Demand studies often use observable characteristics to proxy preference heterogeneity. It is likely, however, that some households with the same observable characteristics have quite different preferences. An alternative approach is to use a Gaussian mixture of Almost Ideal Demand Systems to capture the heterogeneity. We show how to estimate this with censored purchase data for 5 food categories using Bayesian inference. Using model outputs we infer four different preference classes; how distinct these classes are from one another and which food categories are driving the segmentation process.
... Since prices are never perfectly collinear, applying the Stone Price index will introduce the measurement errors of the units (Moschini, 1995). The problem can be solved if the prices are scaled by the sample mean, and become a price index P t . ...
The paper investigates the joint contributions of agroecology and ethnoculture (agroculture) on food security using food demand system analyses. It compares the food demand of the Kwa-Niger-Congo in sub-humid agroecological zone of Coast populations and the Afro-Asiatic Semitic Arabs of the arid agroecological zone. Using food price indices (1991-2011), the methodology adopted for food demand system analyses is the Almost Ideal Demand System while that for nutrition is the Huang 1996 methodology. Results show that a 1% increase in consumer's income increases cooking oil demand by 24% in sub-humid agroecological zone against only 2.1% in the arid agroecological zone. A 1% price increase of fruits and vegetables provokes a fall in vitamin A by 1279 re in sub-humid agroecological zone against an increase of 1793 re in the arid zone. The outcome of the results demonstrates that policies on food security and nutrition should consider the synergy impact of culture and agroecology, which appear to be more severe as compare to their effects considered individually.
... They attributed the use of lagged share to simultaneity problem. However, (Moschini, 1995) suggested other price indices such as Laspeyres, Paasche, Törnqvist, or geometrically weighted average price index. ...
This paper estimates demand elasticities for camel meat in Saudi Arabia (KSA) using the Linear
Approximate Almost Ideal Demand System (LA-AIDS) model and the nonlinear AIDS model.
The results show that the demand for camel meat is price inelastic. The income elasticity of
demand for camel meat, based on the linear AIDS model, shows that camel meat is an inferior
good, while the nonlinear AIDS model indicates that camel meat is a normal good. Furthermore,
this paper estimates nutrients elasticity of meat in KSA by focusing on energy, protein, and fat.
Compared to other meat products, the results show that energy and protein received from camel
meat consumption are considered the least affected meat item in KSA by income and price
changes. Fat received from camel meat consumption is more sensitive to prices and income
changes compared to other meat items in KSA
... Here, the compensated price elasticity is ' ' (Ahmed & Shams, 1994;Deaton & Muellbauer, 1980;Moschini, 1995). ...
This study determines the causes of consumption, compensated, and
uncompensated demand for rice using the Linear Approximate
Almost Ideal Demand System (LA-AIDS) model in Bangladesh.
The model has been used along with the corrected Stone Price
Index. The study's findings showed that the income elasticity of
demand for rice was only 0.76, indicating that rice was a normal and
necessary food item. The own-price elasticity (compensated and
uncompensated) showed that all food items were price inelastic. The
rice's own-price elasticity represented that if the price falls by 10
percent, the demand for rice would rise by 8.21 percent. The cross-
price elasticity showed the weak substitution effects of a price
change. Therefore, price interference possibly will not lead to a
substantial effect on food demand.
... The variables are defined as in Equation (2). The only differences are that, first, Γ(p hit ) is the log linear version of the price index (Moschini, 1995) defined as ln Γ(p t ) = k w j ht ln p htk , whereas Equation (2) specifies a vector of prices. Second, we consider expenditure shares as the dependent variable, w j hit , that sum up to 1 for the three food groups. ...
This paper evaluates a UK policy that aimed to improve dietary information provision by introducing nutrition labelling on retailers’ store-brand products. Exploiting the differential timing of the introduction of Front-of-Pack nutrition labels as a quasi-experiment, our findings suggest that labelling led to a reduction in the quantity purchased of labelled store-brand foods, and an improvement in their nutritional composition. More specifically, we find that households reduced the total monthly calories from labelled store-brand foods by 588 kcal, saturated fats by 14 g, sugars by 7 g, and sodium by 0.8 mg.
... Although this new index is not invariant to changes in the units of price measurement, this problem can be solved using the Paasche Price Index and the loglinear analogue of the Laspeyres Price Index (Moschini 1995): ...
One constraint when dealing with food security problems is the absence of measurement tools that allow for mitigation strategies to be targeted on each region individually. The elasticities can be used as a good exploratory instrument of food security. This paper presents a proposal for measuring the food insecurity dimensions of access and stability, integrating the values of the different kinds of elasticities. The methodology was applied to Spain, using data from nine groups of protein-rich foods of animal origin during the 2004–2015 period in 17 regions. The results suggest that, as regards foods rich in animal proteins, Navarra and Galicia are the regions with the highest food insecurity, and pork meat is the most insecure food product. Comparisons can be carried out between and within regions.
... For prices, we use the price index proposed by Moschini (1995), which, unlike the Stone Price Index commonly used in the literature, is invariant to changes in the units of measurement of prices. In this index, prices are scaled by their sample mean as follows: ...
... (2) Moschini (1995) and Buse (1998) to have good approximation properties and also reduces the potential for severe multi-collinearity while reducing the burden of estimation. ...
Consumption of sugar sweetened beverages exhibits strong associations with weight gain, obesity, and dental caries, especially in young children. The aim of this article is to estimate price elasticities for parents' sugar‐sweetened beverages consumption choices with respect to their pre‐school children and to estimate elasticities with respect to nutritional attribute labels across sugar‐sweetened beverages. Our results show that 1% increase in the price of fizzy drink, juice and cordial would reduce pre‐school children's consumption of each drink by 0.80%, 0.51%, and 0.34% respectively. Such price effects on children's consumption do not substantially differ between high and low‐income respondents but the effect on the children's Fizzy Drink consumption is significantly larger for respondents from large households than those from small households and are significantly lower than the price effects on the consumption of the rest of the family for Juice and Cordial. The marginal effects of demand with respect to nutritional attribute labels of sugar‐sweetened beverages matter for Juice and Cordial, and are strongest for low‐income families; however, these effects do not substantially differ between large and small‐household respondents.
This study employed the revealed comparative advantage (RCA), revealed symmetric comparative advantage (RSCA) and Vollrath’s indices to measure Pakistan’s export competitiveness of cotton yarn in the world. Meanwhile, the country’s export competitiveness is evaluated using the comparative advantage by countries index in China, the world’s largest consumer of cotton yarn and Pakistan’s main export destination. Additionally, linear approximated almost ideal demand systems (LA/AIDS) is employed to anticipate the demand relations for exports of cotton yarn (Pakistan, India and the USA) in the Chinese market over the period 1991–2019. The value of RCA indices greater than one indicates that the country has comparative advantage in exports of cotton yarn in both the global and Chinese market. The findings also revealed that the nation’s comparative advantage position has decreased in global market while improved in the regional market of China. Furthermore, based on the approximation of restricted LA/AIDS model, the results affirmed that the exports of cotton yarn had high own-price sensitivity with negative signs, whereas cross-price sensitivity with positive signs. With regards to Pakistan’s exports, estimates of cross-prices indicate that China’s imports of yarn from Pakistan are substitutable for imports of yarn from India and the USA. In addition, the expenditure elasticity for India and US cotton yarn is greater than one, indicating that China viewed their exports of cotton yarn as quality good. On the other hand, the expenditure elasticity for Pakistan’s is less than one, but close enough to one, which reflects the cut-off point for exports of quality goods. Pakistan, therefore, needs to produce cotton yarn more efficiently by reducing costs and enhancing the reputation of quality to increase exports and market share.
Malnutrition and food insecurity remain a significant public health challenge globally, affecting millions of people, particularly in low- and middle-income countries. In Nigeria, the prevalence of malnutrition and food insecurity is high, with a significant burden in the South-West region. Despite several interventions aimed at promoting healthy diets and reducing food insecurity, little is known about the pattern of healthy diets and zero hunger among households, as well as the budget shares on the food items driving these outcomes. Therefore, this study analyzes the pattern of healthy diets and zero hunger among households in South-West Nigeria, using the primary data elicited from 600 rice-consuming households, drawn through a multistage random sampling technique. Descriptive statistics and Linear Approximation to Quadratic Almost Ideal Demand System (LA-QUAIDS) model were used to analyze the dataset. The estimated LA-QUAIDS model was helpful to decipher the relationships that may not be possible to discover using a single-equation model. The finding of this study revealed that rice, especially local (Ofada) rice, is the most consumed food item among the households in the study area with a monthly budget share of 0.195. This is an indication that households spend approximately 19.5% of their monthly food expenditure share on rice consumption. The results also indicated that yam flour (−0.10), cassava-gari (−2.12), and meat (−0.03) are net complements to rice, while the rest of the food items are regarded as net substitutes. The estimated compensated (−1.64) and uncompensated (−1.69) own-price elasticities of local rice, respectively, indicate that local rice variety is price inelastic, and the estimated expenditure elasticity (0.02) suggests that local rice is not a luxury food in the household food basket but a necessity. This study affirms the importance of locally produced foods, especially local rice to the households in the study area. In light of the findings, this study recommends adequate policy aimed at reducing the cost of local food production by boosting domestic production. Apparently, this will technically trigger market price adjustment, as shown in this study, where local rice was estimated to be own-price elastic in nature.
p>Branded sausage is one of the fast foods, and the demand for it in Nigeria is increasing substantially due to growing household affluence and its availability and affordability. The study examined the market concentration and the need for branded sausage rolls in Oyo State using 290 respondents (buyers and sellers) collected through a three-stage sampling procedure. The study affirmed that Gala (small and big) had the highest percentage (41.3%) of consumers while bigi and the rite spicy had 22.7% and 21.4%, respectively. The yum-yum brand had the lowest consumers percentage (1.8%). The average amount consumers spent on gala (big and small size) per month was ₦824.18 followed by rite spicy and bigi with a moderate amount of ₦582.98 and ₦520 per month. Gala (small and big) had the highest inequality in sales revenue (0.42) while bigi had the least (0.26). The market concentration of gala was the highest (50%) while bigi had the least (40%). The market share of the gala (big and small size) was 54.4 percent followed by rite spicy and bigi with 23.9 and 21.1 percent, respectively. Monthly income, taste, quality, price, and availability influenced consumers' preference for sausage rolls while monthly payment, household size and brand consumed determined consumers' monthly expenditure on sausage rolls in the study area. The yum-yum brand had the lowest consumer’s percentages in the sausage market at 1.8%. Producers of other sausage rolls brands should develop strategies that would ensure fair competition with other brands so that the dominance of some brands can be reduced to prevent the emergence of a monopolist in the sausage rolls market. The need for market segmentation based on consumers’ income is recommended.</p
En un contexto cimentado en la globalización de los mercados, la economía del conocimiento y el uso creciente de nuevas tecnologías de la información y la comunicación, puede resultar paradójica la permanencia, e incluso el creciente dinamismo, de aglomeraciones de empresas en pequeñas localidades rurales relativamente aisladas y con escasa infraestructura de comunicaciones terrestres con centros urbanos importantes. En México, dadas las políticas de desarrollo de las últimas
tres décadas, estas experiencias resultan relativamente atípicas, toda vez que las zonas urbanas son el principal referente de la industrialización, aprovechando las economías de escala que ellas suponen para vincularse con proveedores y compradores, la densidad de los mercados de trabajo y los activos relacionales de aprendizaje e innovación, entre otros factores.
Cash transfers' positive impacts on food expenditures are well documented. However, beneficiaries' increased market-reliance might render their real consumption more vulnerable to price shocks, which hit developing countries regularly. We contribute to the sparse evidence base on this issue by analysing the effects of a cash transfer programme on food demand during a drastic price shock in Kenya. We find that the shock decreases beneficiaries' real food consumption more than that of non-beneficiaries. The magnitude of this effect varies considerably depending on how particular food baskets are affected by the shock.
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.
Brazil is the largest milk producer in South America, with an increasing trend in the last 20 years which allowed the country to start exporting some output. However, it has not become self-reliant and continues to be a major importer in the region, the most relevant partner for Argentina and Uruguay in Mercosul. In this paper, the Brazilian import demand of dairy products is estimated by using a source differentiated demand system framework that is derived from consumer theory. This model takes into account the countries of origin (i.e., Argentina, Uruguay and other grouped competitors) and various dairy aggregated items that compete in the Brazilian market. The expenditure elastici-ties, and the own and cross-price elasticities are computed with the estimated parameters of the demand system. Interpretation of results follows as well as some conclusions, including the need of further studies and usefulness of this type of research.
Este trabalho analisa o mercado e o consumo de leite no Reino do Bahrein com foco nas leis da oferta e da procura. Os resultados mostraram que a demanda por leite em Bahrain é inelástica ao preço e o leite importado é um complemento ao produzido internamente. Além disso, a oferta por leite doméstico em Bahrein é inelástica ao preço e o aumento do leite importado gera aumento na produção de leite doméstico. Além disso, com o aumento da renda interna ocorre o aumento da demanda por leite doméstico e importado. No entanto, isto não afeta a oferta por leite doméstico e os preços. Por outro lado, o aumento no preço de feno e alfafa diminui a produção de leite doméstico e aumenta a importação.
Vietnam is faced with the issue of increasing overweight and obesity, particularly among children and adolescents in urban areas. As a result, the government of Vietnam recently introduced a proposal to impose a special consumption tax on sugar-sweetened beverages (SSB) in Vietnam, as the drinks are causing negative health consequences for Vietnamese people. This research is aimed at evaluating the impacts of a 10% special consumption tax on SSB in Vietnam using the Almost Ideal Demand System (AIDS) model. We found that a 10% SSB tax will reduce SSB consumption by 11.4%. Consumers will switch to substitutes, leading to an increase in the consumption of milk by 2.3%, beer by 2.5%, dried tea by 2.2%, and wine by 1.7%. However, in the short run, the tax could lead to a decrease in consumer welfare due to higher SSB prices. In addition to people from better-off households, people from the ethnic majority group, most of which live in urban areas with a large number of children, have a relatively high welfare reduction.
In 2016, the U.S. launched a trade dispute against China at the World Trade Organization, arguing that China has been restricting its grain imports via tariff quota administration. Despite sharp criticism by the U.S., the extent to which the grain imports were restricted in China remains largely unknown, primarily due to that China's grain import behaviors are still under‐researched. The U.S. grain export sector might actually gain little from China's grain trade liberalization, since China has become less import‐dependent on the U.S. through the pursuit of import diversification. In this context, this article aims to quantify impacts of the tariff quota administration on China's grain imports from its trading partners. We calculate ad valorem tariff equivalents of the tariff quota administration and then estimate import demand elasticity using a source differentiated import demand model. We find that the tariff quota administration might have reduced China's quota fill rates for the grain commodities by 10–35% during 2013–2017. In particular, the U.S. wheat exports to China were largely negatively affected. We also find that the tariff quota administration in China acts like a variable import levy – its import restrictiveness varies negatively with world prices, leading to lower import demand elasticities. This article is protected by copyright. All rights reserved
Dynamic almost ideal demand systems are estimated for meat aggregates and for disaggregated meat products. Tests for weak separability show that consumers choose among meat products rather than meat aggregates such as “beef” or “chicken.” Therefore, tests for structural change in the meat aggregates may be biased. Tests for structural change in the meat products show an exogenous constant annual 6,4% growth in chicken parts demand from 1965 to 1985 and a 3.5% decline in beef table cut demand after 1974. Increased demand for convenience may explain these changes.
We present an inverse demand that can be estimated in a linear form. The model is derived from a specification of the distance function which is parametrically similar to the cost function underlying the Almost Ideal Demand System. Simulation results suggest that this linear inverse demand system has good approximation properties.
The hypothesis of structural change in U.S. meat demand is tested in a four-meat almost ideal demand system with parameters
following a gradual switching regression model. The results support the notion that structural change partly explains the
observed U.S. meat consumption patterns. Structural change is biased against beef, neutral for pork, in favor of chicken and
fish, and it does not affect estimated elasticities. The estimated path of structural change implies a rapid transition to
a new regime in the mid-1970s, although a smooth path cannot be ruled out.
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.
A systems model of U.S. food fats and oils demand is estimated using quarterly time-series data for the period 1962–87. Demographic
scaling is used to incorporate demographic variables and per capita government butter donations. In addition to price, income,
and demographic demand elasticities, dietary fat intake elasticities are calculated for each of the demographic characteristics
included in the study. All of the five own-price elasticities are statistically significant, as are fifteen of the twenty
cross-price elasticities. Fourteen of the fifteen demographic elasticities are statistically significant.
Direct and indirect translog utility functions provide budget share equations which are both flexible and consistent with the theory of utility maximization. These forms are attractive for modelling consumer behavior. Because of their flexibility they are ideal for testing hypotheses such as additivity of preferences. In this paper we use the translog methodology to analyze U.S. consumption of the four principal categories of meat-fish, beef, poultry, and pork. We decisively reject the hypothesis of additivity. However, further testing for partial additivity reveals that (beef) and (fish, poultry, pork) are additively separable subgroups of meat.
The estimation and testing of a singular equation system in the context of a general dynamic specification is considered. In an application to factor demand equations, hypotheses suggested by economic theory are expressed in terms of the long run structure of the system under alternative dynamic specifications. Variations in the dynamic specification are found to have a significant impact upon the inferences that can be made about the long run structure.
This paper presents estimates of the economic and demographic effects on the demand for steak, roast, and ground beef. Using an almost ideal demand system, the results indicate that demand is inelastic for steak and ground beef, elastic for roast, cross-price effects are significant, and all goods are Hicks-Allen substitutes. The impact of certain demographic effects, such as household size, region, tenancy, and ethnic origin, was generally quite significant. Other demographic variables, such as employment status, shopper, and occupation, were generally not significant.
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.
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.
The Almost Ideal De-mand System: A Comparison and Application to Food Groups
- L Blanciforti
- R Green
Blanciforti, L., and R. Green. "The Almost Ideal De-mand System: A Comparison and Application to Food Groups." Agr. Econ. Res. 35(July 1983):1-10.