Demand System Approach Research Articles

Citrus greening, retail fruit prices, and household welfare: A demand system approach

Abstract Pests and diseases like citrus greening that threaten agricultural productivity also pose a risk to consumers. Reductions in food supply due to outbreaks and spread could increase food prices. We model U.S. household fruit demand using a Quadratic Almost Ideal Demand System and data from Circana’s 2020 and 2021 household panel. Price and income elasticity estimates reveal how household behavior might adjust with shocks to citrus and other fruit prices. Shocks to retail fruit prices can be from either citrus greening or other phenomena such as adverse weather. We also use compensating variation to estimate the impact that changes in fruit prices could have on consumer welfare.

Effects of Socio-Economic and Demographic Factors on Meat Consumption Pattern in Iran: A Demand System Approach

Meat as one of the most important resources of protein has a special role in human nutrition. Understanding the meat consumption structure of households is essential for planning and policymaking in this regard. In this research, we studied consumption patterns of meat products including chicken, veal, lamb, and fish for households in Iran (Mashhad city) using demand system estimation. The hypothesis of this study is that chicken is a necessary goods and other types of meat are luxury goods. Given the cross-sectional nature of the data and presence of zero expenditure for some households, we used the censored demand model based on a consistent two-step approach. For this purpose, at first, four Probit models were estimated to determine the factors affecting the probability of purchasing each selected meat product. After that, the probability density function (PDF) and the cumulative distribution function (CDF) were calculated for each selected meat product, and the Almost Ideal Demand System (AIDS) considering PDF and CDF was estimated for all types of meat using a non-linear seemingly unrelated regression. Also, the effect of demographic variables on meat consumption pattern was considered in demand system. The results of expenditure elasticities confirmed the hypothesis. The highest own-price elasticity was related to veal. Based on compensated price elasticities, all types of meat were net substitutes for chicken and chicken was also a net complement for all types of meat. On the other hand, the only substitute for lamb and chicken was veal, but with compensating income effect fish also became a substitute for them. So, in the event of an increase of the price of lamb and chicken, we recommend subsidizing the consumers with low purchasing power in order to increase the diversity of consumption of protein products. This can increase the consumption of fish.

An Almost Ideal Demand System approach in analysing demand for Indonesian imported rice

An Almost Ideal Demand System approach in analysing demand for Indonesian imported rice

The impact of taxing sugar‐sweetened beverages in México: A censored QUAI demand system approach

AbstractIn 2014, México imposed a 20% price hike on sugar‐sweetened beverages (SSB) to curb its obesity epidemic, paving the road for other Latin‐American countries to adopt similar measures. This paper estimates a beverage demand system with a censored Quadratic Almost Ideal Demand system. Our study finds that a 20% tax on SSB can reduce SSB consumption between 16.6% and 19.0%. Additionally, the price increase is associated with increased water consumption if an equivalent income compensation accompanies the fiscal approach. Finally, while the effect is small, our results indicate that education is the primary demographic factor in decreasing SSB consumption.

The benefits of action on implementing carbon taxation in Ireland: a demand system approach

We employ the Affine Stone Index demand system and Irish data to quantify the distributional effects of additional carbon taxes, taking into account the monetary benefits of action. We estimated the avoided economic damages from climate change, and the monetary value of the avoided emissions using willingness to pay from the literature. When these benefits of action are included in the metric for tax incidence, the tax burden decreases considerably. In addition, when the benefits disproportionately benefit low income households, carbon taxes are no longer regressive. We also analyze a flat and a pro-poor revenue allocation. We found that while these instruments reduce vertical inequalities (i.e. across income levels), they can increase horizontal inequalities (within income levels). We show that these instruments can reduce the environmental savings attributed to the additional carbon tax. However, this problem can be minimized by a partial allocation of additional revenues.

PREFERENCE PATTERNS & DEMAND ANALYSIS OF TRADITIONAL FOOD USING LOGISTIC REGRESSION AND ALMOST IDEAL DEMAND SYSTEM APPROACH

Garut has many famous traditional foods. These traditional foods continue to exist despite the changing times and changes in people's consumption patterns. Consumers' preferences for traditional foods such as dodol, skin crackers, wajit, rengginang, and processed bananas thoughted to reflect the various patterns of demand for these traditional foods. This study aims to analyze the effect of price, income, education, taste, and promotion as people's preferences for traditional Garut food and analyze people's demand for traditional Garut food, using primary data with a sample of 100 respondents determined based on accidental sampling. The analysis used was logistic regression and the Almost Ideal Demand System (AIDS). This research offers novelty in the form of promotional variables, and demand analysis through the Almost Ideal Demand System (AIDS) approach analyzes the demand for traditional Garut food. The study results are (1) Price has a significant positive effect on people's preferences for traditional food. Income and education do not affect people's preferences for traditional food. Food taste and promotion have a significant positive effect on people's preferences for traditional food. (2) The highest demand for traditional food is dodol. The price changes have not influenced the demand for traditional food or inelastic elasticity. The price elasticity itself is positive inelastic, while most of the cross elasticity is positive, which means that traditional foods replace one another (substitutions).

Place matters: Out-of-home demand for food and beverages in Great Britain

Fiscal policies to influence consumption of food and beverages are increasing globally. Most food demand studies focus on understanding consumer response in the context of food and beverages consumed at home. Yet food and beverages consumed outside of the home play an increasing part in our diets, and demand elasticities for these settings are crucial for assessing the potential impact of such fiscal measures on promoting healthier diets. Utilising a large out-of-home food purchase dataset from Great Britain in 2016–17, this paper analyses the demand for seven food groups across four outlet types, including restaurants, fast-food outlets, food retails and other outlets. We use a demand system approach to estimate price and expenditure elasticites of demand, along with procedures to account for censoring, expenditure and price endogeneity. Our results indicate substantial variations in consumer responses across outlet types. Demand for main meals is expenditure and price elastic in restaurants but inelastic in fast-food outlets. For sugary drinks, the demand is generally price elastic except in fast food outlets. These differences across outlet types highlight the complexity in studying out-of-home food and beverage consumption and the importance of accounting for where consumers buy from when designing, implementing and evaluating consumer responses to fiscal measures.

Extending the Demand System Approach to Asset Pricing

Extending the Demand System Approach to Asset Pricing

ESTIMATION OF DEMAND SYSTEM FOR HOUSEHOLD ENERGY CONSUMPTION: EMPIRICAL EVIDENCE FROM INDONESIA

This study aims to estimate the pattern of household demand for energy consumption such as electricity, water and fuel. The data used in this study is the publication of the Indonesia Family Life Survey (IFLS). To obtain comprehensive estimation results, this study uses the Quadratic Almost Ideal Demand System (QUAIDS) approach which is currently the standard in household demand estimation systems. The unit of observation used in this paper is more than three thousand households representing 13 provinces in Indonesia. The results show that the largest household energy consumption expenditure is electricity consumption followed by fuel and water. However, unlike the case of other commodities, the elasticity of spending on electricity is negative. Thus, an increase in household income will shift spending from electricity to consumption of other goods such as fuel, water and others. Meanwhile, the price elasticity for all energy commodities is inelastic. The increase in energy consumption commodity prices did not change demand much. This means that households are still very dependent on the supply of energy goods produced by the government. Therefore, appropriate policies are needed in determining the basic electricity tariff, fuel prices and clean water supply so that basic household needs can be fulfilled. Keywords: Energy Consumption, System Demand, Household Expenditure, QUAIDSJEL Classifications: D12, Q41, R20DOI: https://doi.org/10.32479/ijeep.11714

Structural Adjustment of São Paulo Sugarcane Plantation in the Euro 7 Context

This article analyzes the replacement of Sugarcane by the adequate crop considering the producer's choices according to the dimensions of soil, relief, climate, and precipitation in Sao Paulo state, Brazil. The panorama is the hypothetical end of the combustion engine in the Euro 7 emissions standard context. The analysis is done in two sequences: the first is with the Artificial Intelligence methodology that searched, by Machine Learning, all the Sugarcane geographic coordinates in the Sao Paulo state and, through Deep Learning, applied, in the places found, the producers' knowledge, concerning climate, environmental and physical dimensions. The second sequence is an econometric analysis, where the authors estimate the price elasticity of demand for 25 crops from the AIDS demand system approach. Artificial Intelligence results coincide with the total area of Sugarcane in Sao Paulo observed in the PAM (agricultural statistics for the municipality produced annually by the Brazilian Institute of Geography and Statistics) and show that 48 crops are suitable for its geographic coordinates. With the results of both sequences in hand, the authors point to 17 competitive crops in the Interest Area, but only six highlighted crops are suitable for sowing in all the 13 Central Supply Zones (known in Brazil as Ceasa) of state.

Consumption and Beef Price Changes on Demand in East Nusa Tenggara, Indonesia

Households consume animal protein after carbohydrate food is fulfilled, moreover animal protein prices are increasing. This study aims to analyze the effect of rising beef prices on demand. The demand system approach uses the Quadratic Almost Ideal Demand System (QUAIDS) model. Estimation of parameters using Iterated non-linear Seemingly Unrelated Regression. The research data use the 2016 National Socio-Economic Survey (Susenas, 2016), amounting to 10,751 households. The results of the study concluded that beef is the third most elastic animal food after fresh fish and chicken meat. Fresh fish in the most elastic among all animal foods with a demand elasticity of 3.31%, followed by chicken, beef, milk powder, and eggs with demand elasticities of 1.55%, 1.62%, 1.29%, and 0.80%, respectively. Beef is a luxury item with an income elasticity of 1.59%, as well as fresh fish, chicken meat, and milk powder. While eggs are normal goods. Although fresh fish is more elastic than beef, beef marginal expenditure share (MES) is higher than fresh fish MES, so that in the long run, the increase in household income tends to increase beef consumption more than fresh fish.

Mutual Fund Risk Shifting and Risk Anomalies

Risk-shifting by underperforming funds increases their demand for risky stocks. We investigate its contribution to the well known risk anomalies: the apparent overvaluation of stocks with high beta, idiosyncratic volatility, and skewness. We show that these anomalies are concentrated among stocks mainly held by laggard funds. Exploiting the Morningstar methodology change in 2002, whereby its “star” ratings became based on relative performance within a style category rather than across the entire fund universe, we show that the beta anomaly is significant only when beta is measured against the S&P 500 index for the pre-2002 period and against the relevant category index for the post-2002 period. Using a demand system approach we find that removing holdings of the bottom performance quintile of funds substantially reduces the beta anomaly returns.

Direct and Indirect Energy Rebound Effects in German Households: A Linearized Almost Ideal Demand System Approach

We estimate direct and indirect energy rebound effects for a wide variety of goods and services in Germany. To this end, we employ a linearized approximation of the popular Almost Ideal Demand System (AIDS) approach suggested by Deaton and Muellbauer (1980). Excluding measures of energy efficiency when estimating rebound can lead to biased results. We compensate for this shortcoming of previous research by explicitly accounting for energy efficiency in our estimations. Using data for Germany from 1970 to 2017, we find moderate direct and significant indirect rebound effects for different energy carriers across four model specifications. The size of the rebound effect proves to be sensitive to the expenditure shares used for the calculations, which in some cases leads to negative overall rebound estimates.

Do some travel purposes lead to more tourist expenditure patterns than others? Evidence from an almost ideal demand system (AIDS) analysis

ABSTRACT Tourists have different travel purposes and show different patterns of resource consumption at travel destinations. The present study examines travel expenditure patterns among domestic travelers with different main travel purposes during the holidays by utilizing the almost ideal demand system approach. The study used data from 760 Korean respondents and determined that tourists pursuing different travel purposes exhibited significant differences in expenditure patterns. The travel expenditure allocation of different tourist types with varying travel purposes can provide important information that can contribute to the sustainable development of tourism destinations by tailoring travel activities and programs for targeted segments.

Are Green Investors Green-Inducing? A Demand System Approach

How should we quantify the institutional price pressure induced by demand for green stocks? We use the equity holdings of institutional investors and the demand system approach to answer this question. We devise and estimate a firm-level quantity, institutional pressure for greenness, that measures the price pressure a firm receives from its institutional owners to become more environment-friendly. We find that this quantity has a positive and significant relationship with future improvement in a firm’s carbon intensity, but not with other measures of a firm’s environment performance. We also find that investors with high portfolio-level environment scores do not necessarily contribute to higher institutional pressure. Instead, investors who are price-inelastic and display a positive portfolio tilt towards greenness – those who overweight greener stocks even after controlling for other characteristics – contribute the most to institutional pressure.

Enhancing rail direct demand models with competition between ticket types using contributions from economic theory and market research

Abstract Direct demand models estimated to ticket sales data have for many years provided evidence on how key variables influence rail demand in Great Britain. Nonetheless, there has been relatively little estimation of demand models disaggregated by ticket type which would provide own and cross-price elasticities that can inform the pricing of different ticket products. We here report such enhanced models estimated on large data sets and exploiting the relationships of economic theory within a demand system. In addition, a complementary market research exercise is undertaken that itself provides ticket specific own and cross-elasticities and which also supports the estimation of models jointly based on actual and stated behaviour. We conclude that the demand systems approach can recover robust ticket specific own-elasticities but that there are econometric difficulties in estimating cross-elasticities even using supporting economic theory, so that cross-elasticities between tickets are better deduced from these own-elasticities than estimated. This contrasts with the convention in the railway industry in Great Britain where own and cross-elasticities are deduced from recommended conditional elasticity evidence. Market research also has a role to play and provides own-elasticities that, as is common, are rather larger and cross-elasticities that are a little larger than those derived from ticket sales analysis. A key feature of this work is to reconcile those two approaches by scaling the market research elasticities using ticket sales data. This further supports our conclusion that generating robust own-elasticities and deducing cross-elasticities from these is currently the most fruitful method of obtaining a full set of own- and cross-elasticities for different ticket types within a demand system framework, and that this approach is superior to the conventional single equation approach.

On Estimating the Impact of the Deepwater Horizon Tragedy on the U.S. Frozen Seafood Market: A Conditional Almost Ideal Demand System Approach

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.

Agricultural Households’ Food Demand: Evidence from Indonesia

This study analyzes the consumption patterns of agricultural households in Indonesia using the 2013 first quarter data of the Indonesian National Socioeconomic Survey (Survei Sosial Ekonomi Nasional [Susenas]) and the quadratic almost ideal demand system (QUAIDS) approach. Indonesian households’ food expenditure is mostly on rice, vegetables, and fish. Rice expenditure is a top priority particularly in agricultural household spending in Indonesia. Agricultural households consume more calories and carbohydrates, but less protein and fat, than nonagricultural households do. The expenditure elasticities of agricultural and nonagricultural households are significantly different only in the following commodities: milk, other foods, meat, fruits, and rice. The differences in the price elasticities of the two household groups are found in non-rice staple, other

Agricultural Households’ Food Demand: Evidence from Indonesia

This study analyzes the consumption patterns of agricultural households in Indonesia using the 2013 first quarter data of the Indonesian National Socioeconomic Survey (Survei Sosial Ekonomi Nasional [Susenas]) and the quadratic almost ideal demand system (QUAIDS) approach. Indonesian households’ food expenditure is mostly on rice, vegetables, and fish. Rice expenditure is a top priority particularly in agricultural household spending in Indonesia. Agricultural households consume more calories and carbohydrates, but less protein and fat, than nonagricultural households do. The expenditure elasticities of agricultural and nonagricultural households are significantly different only in the following commodities: milk, other foods, meat, fruits, and rice. The differences in the price elasticities of the two household groups are found in non-rice staple, other foods, rice, and milk. The expenditure elasticity of nutrients of agricultural households tend to be higher.

휘발유 및 경유의 수요탄력성 추정에 관한 연구: 수요체계적 접근

석유자원은 현대인의 생활에 필수불가결한 자원이다. 그러나 석유자원에 대한 의존성은 기후변화라는 범지구적인 문제를 야기했으며, 이에 전 세계적으로 기후변화를 완화시키기 위한 정책적 관심이 급증하고 있다. 따라서 본 연구에서는 휘발유와 경유의 수요탄력성을 추정하기 위해 2005년부터 2015년까지의 가계동향조사 데이터를 소비체계적 접근을 통해 분석했다. 가계의 소비지출은 소득과 재화·서비스 가격에 영향을 받으며, 수요체계적인 접근을 통해 가계의 소비지출에 대한 분석은 정부의 정책결정 과정에 있어 기초적인 참고자료가 될 수 있다. 실증분석 결과 휘발유와 경유의 소득탄력성은 각각 0.958, 0.880으로 나타나 모두 양(+)의 값을 가지는 정상재로 나타났으며, 소득에 대해 비탄력적인 것을 알 수 있었다. 두 재화의 자기가격탄력성 또한 모두 음(-)의 값을 가지는 것으로 나타났으며, 휘발유의 자기가격탄력성은 절댓값이 1보다 작게나와 자기가격에 대해 비탄력적인 재화로 나타났고, 경유의 경우 자기가격탄력성의 절댓값이 1보다 크게나와 탄력적인 재화로 나타났다. 이러한 결과는 경유가 휘발유에 비해 가격에 더 민감하게 반응함을 의미한다.Oil resources are very necessary goods for modern life. But high dependency of oil resources cause various problems. Especially environmental problem that global warming caused is becoming a major concern. In this paper, using micro data from 2005 to 2015 rounds of the household income and expenditure survey data, we estimate demand elasticity for transport fuel by demand system approach. Changes in Income and price of goods impact on expenditure of household and analysis of expenditure of household by demand system could be a basis of policy making process. Our estimates show that income elasticity for gasoline and diesel fuel are 0.957528, 0.880147, respectively. The finding show that gasoline and diesel fuel are normal goods and inelastic for income changes. We also find that, both of own-price elasticity are negative. As our finding, demand for gasoline is inelastic for own-price change and demand for diesel fuel has opposite result to gasoline. This founding indicates demand for diesel fuel is more sensitive to own-price change than gasoline.