Multivariate gradual switching systems and the stability of US meat demands: a Bayesian analysis

Abstract

A multivariate gradual switching system with stochastic cross-equation constraints is utilized within the framework of Bayesian inferential procedures to consider the stability of an almost ideal demand system (AIDS) for meats. Results confirm the existence of a significant structural change which was initiated in 1961 and was not completed until after 1983. Elasticity estimates reveal an increased sensitivity of beef demand to changes in its own price and in prices of pork and poultry and a decreased sensitivity of poultry demand to changes in its own price in the post-shift regime. The income elasticities for poultry and fish display dramatic changes while income elasticities for other meats remain fairly stable. The changing expenditure elasticities suggest that poultry and fish have gone from being inferior commodities prior to the shift to superior (luxury) commodities after the shift. The timing and nature of the shift is consistent with structural changes which may have arisen from increased consumption of processed convenience-type poultry products, and from nutritional concerns which may have shifted demand away from red meats toward poultry and fish.