The Influence of Urbanization on the Income Elasticity of Demand for Retail Food in Low Income Countries

Abstract

ECONOMISTS have been frustrated in attempting to establish realistic food production targets for development programs in low income countries by considerable uncertainty about estimates of future food consumption. To reduce some of this uncertainty, an investigation was made of a number of factors influencing food consumption. This paper reports on the effect of the movement of population from rural to urban areas on the income elasticity of demand for retail food. In estimating future food consumption, an equation given by Ohkawa is generally accepted. It states that the rate of increase in the consumption of food is the sum of the rate of population growth plus the product of the rate of per capita income growth and the income elasticity of demand for food (d = p + gn).1 Consideration of the data needed for this equation focuses attention on estimates of the income elasticity of demand for food. Little progress has been made since World War II in increasing the reliability of food elasticity estimates for use in projections in low income countries.