Demand System Approach Research Articles

Direct and Indirect 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 (LAIDS) approach suggested by Deaton and Muellbauer (1980). Excluding measures of energy efficiency when estimating rebound can lead to biased results. We alleviate this shortcoming previous research has suffered from by explicitly accounting for energy efficiency in our estimations. Using data for Germany from 1970 to 2014, we find moderate direct and significant indirect rebound effects for different energy carriers across four model specifications. Income rebound effects are counterbalanced by significant negative substitution effects, which in some cases even lead to negative overall rebound estimates.

Analysis of Korean millennials’ travel expenditure patterns: an almost ideal demand system approach

ABSTRACTGenerational cohorts can differ in their consumption patterns and preferred travel behavior. As the millennial generation represents an important economic force and influences new consumption trends, this study utilizes nationwide data and almost ideal demand system (AIDS) approach to examine expenditure patterns of Korean travelers during holidays. In this process, the joint effects of travel-related characteristics are also examined. The results of the AIDS estimation on data from 871 domestic travelers reveal significantly different travel expenditure patterns for cohorts. The findings contribute to furthering the understanding of how different generational cohorts allocate their travel budgets to respective travel expenditure categories.

Demand for selected exotic fruits and vegetables among government workers: a quadratic almost ideal demand system approach

Demand for selected exotic fruits and vegetables among government workers: a quadratic almost ideal demand system approach

Meat demand model in Iran: a restricted source-differentiated almost ideal demand system approach

The gradual disappearance of pastures due to overgrazing of cattle, high cost of meat (red and poultry) and gradual increasing domestic demand, so far, meat imports in Iran have been inevitable to meet domestic needs. In this article, the authors have used RSDAIDS model, the economic factors (meat prices and costs) and non-economic factors (prevalence of diseases) affecting the demand for meat (beef and poultry) during the years 2002-16 have been investigated. The results of this study shed light on Iran consumer preferences with regard to imported meat. This is the first study that analyzes the Iran meat demand differentiated by source. In this study, it was observed that Brazil, United Arab Emirates, Ireland and Turkey were the most gainer from an increase in the size of the imported meat market of Iran. Also, these countries had a competitive advantage compared with other export sources.

The effect of agritourism experience on consumers’ future food purchase patterns

Recent studies on agritourism share a common voice in that the economic benefit of agritourism to farms is significant but rather small. However, the majority of studies examine only the short-term economic impact of agritourism. This suggests that the potential long-run economic impacts of agritourism may not have been empirically investigated yet, leading to underestimation of its net impact. Meanwhile, theories on mere exposure and product familiarity suggest that agritourism may lead tourists to change their agriproduct purchasing patterns after the experience. Thus, this study examines the effect of agritourism experience on consumers' future grocery purchase patterns. Household-level consumer panel data on grocery expenditure is estimated through the Almost Ideal Demand System (AIDS) approach. The results indicate that agritourism experience significantly alters consumers' expenditure patterns in the food categories of grain, vegetable, fruit, meat, and fish. Implications for research and practice are discussed along with the findings of the study.

Factors affecting households' meat purchase and future meat consumption changes in China: a demand system approach

BackgroundChina is the world's largest meat market. If consumption of meat in China continues to grow, there will likely be greater business opportunities for meat producers both in and outside of China. As a result, meat exporting countries such as the U.S. may be influenced by changes in meat consumption in China. A better understanding of future meat demand in China will benefit both producers and exporters. The aim of this study was to evaluate factors that affect households' meat purchase and to estimate future meat consumption changes in China. MethodsThis study was based on primary data collected from a consumer survey in Guangzhou city in 2014. A total of 617 completed questionnaires were obtained from the consumer survey. An advanced linear approximated almost ideal demand system was used for data analysis. ResultsThe results indicated that the average household monthly purchase of pork, chicken, beef, and mutton was 2.90 kg, 1.47 kg, 0.77 kg, and 0.33 kg, respectively. Estimated expenditure elasticities for each meat item were 0.78, 1.02, 1.34, and 1.83, respectively. The uncompensated own price elasticities for each corresponding meat item were −0.79, −0.75, −0.70, and −0.25, respectively. The compensated own price elasticities were −0.44, −0.47, −0.46, and −0.14, respectively. High-income households purchased more meat, especially pork, chicken and mutton, than low-income households. Meat consumption pattern will be affected by income changes. ConclusionCollectively these results suggest that there will be a potential meat market expansion in China, and that pork consumption will increase at a quantity much larger than other meat items in the near future, assuming that consumer income will continue to increase. China's projected increase in meat demand will eventually stimulate greater meat imports, which may have a significant influence on meat exporting countries in the world.

Energy Goods Demand in Tabalong Regency: Almost-Ideal Demand System Approach

The declining trend of Tabalong Regency’s economic growth in recent years adversely affected the poverty rate. Further, the recent energy subsidy policy applied by the Indonesian Government has pushed the subsidy’s budget down for some energy goods. Therefore, there should be an awareness regarding the current energy policy and the impact on the poverty particularly in Tabalong Regency. This paper investigates the demand system for the three main energy goods; premium fuel, electricity, and Liquid Petroleum Gas (LPG) in Tabalong Regency of the South Kalimantan Province. Although the same method was previously used on the different topics, this paper uniquely utilizes the combined Linear Approximation and Quadratic Almost-Ideal Demand System on the particular energy policy topic. This paper utilizes the National Social Economics Survey conducted by BPS-Statistics of Tabalong Regency in 2016. The results show that the income elasticity of demand for the top 60% and the bottom 40% of the income groups were positive; however, slight differences could be seen. For the top 60% of the income group, the income elasticities of demand were 0.97, 1.02, and 1.08 for premium fuel, electricity, and LPG respectively. On the other hand, the bottom 40% of the income group had 0.99, 1.07, and 0.91 of income elasticity of demand for premium, electricity, and LPG. The price elasticity of demand for both income groups had negative signs, which is agreeing with the theoretical demand function. These results indicate that the current energy policy should continue with securing the poor households from the possible effect.

Analysis of Japan?s Import Demand for Indonesian Plywood by Almost Ideal Demand System Approach

Analysis of Japan?s Import Demand for Indonesian Plywood by Almost Ideal Demand System Approach

Does Previous Marijuana Use Increase the Use of Other Drugs: An Almost Ideal Demand System Approach

Abstract From a policy standpoint, the legalization of marijuana may affect other drug markets. The Almost Ideal Demand Model is used to estimate drug substitution between the most common illegal street drugs in the US including cocaine, heroin, marijuana, and methamphetamines. We control for past marijuana consumption. Results indicate that past marijuana consumption does not contribute to increased current consumption of other drugs. Further, marijuana is a weak complement to methamphetamines but marijuana price changes do not affect heroin or cocaine consumption.

The Effect of Central Grants Reform on Local Government Expenditures in Japan: A Demand System Approach

The Effect of Central Grants Reform on Local Government Expenditures in Japan: A Demand System Approach

The Distributional Impact of VAT Reduction for Food in Hungary: Results from a Hungarian Microsimulation Model

In this paper we illustrate how the incorporation of behavioural responses and dynamic effects alters the conclusions of static household microsimulation models on the distributional impacts of economic policies. Based on Hungary's Household Budget and Living Conditions Survey, we model household consumption using the demand system approach of Creedy, 1998. This method makes it possible to obtain reasonable price elasticity estimates of consumption from cross-sectional data by combining them with Frisch-parameter values obtained from cross-country studies. With this consumption module, we simulate the distributional impacts of a hypothetical food VAT rate change in Hungary and show how the static and behavioural impact estimates differ according to income decile. We examine the sensitivity of our results to the choice of the country-level Frisch-parameter and to a realistic allowance for household-level variation in the Frisch-parameter.

Demand relationships in orange exports to Russia: a differential demand system approach focusing on Egypt

Recent years have witnessed closer diplomatic relations between Egypt and Russia, which have led to significant growth in the countries’ bilateral agricultural trade. As a world-leading producer and exporter of oranges, these developments represent an opportunity for Egypt to promote its orange exports to Russia. Another emerging opportunity for Egypt to increase its share in the Russian market for imported oranges has been provided by import embargos imposed by Russia in recent years on agricultural and food commodities from several countries, creating a supply gap of around 25 % in the Russian orange market. To assess the competitiveness of Egyptian oranges and explore the potential export opportunities presented by the Russian market, this paper uses a Rotterdam import allocation model to analyse demand relationships among major orange suppliers to Russia during the period 1996–2014. The results show that in comparison with other orange suppliers, Egypt enjoys a strong comparative advantage in the export of oranges to Russia. The econometric results suggest that both Morocco and Egypt would benefit the most if Russia were to allocate a larger budget to the import of oranges. The expenditure elasticity estimates indicate that an increase in Russia’s demand for imported oranges would lead to increases in the quantity of Egypt’s orange exports, as well as in its share of the Russian orange market. Furthermore, cross-price elasticity estimates reveal that Egyptian oranges are substitutes for Turkish and South African oranges, implying that Russia has a tendency to switch to these two suppliers when Egyptian oranges become relatively expensive. In light of these results, the adoption of strategies to produce oranges sustainably and cost-effectively, upgrade the orange value chain, acquire processing technologies and enhance the technical and organisational capacity of farmers and exporters could be useful means for promoting exports and boosting the competitiveness of Egyptian oranges on the Russian market.

Determinants of import demand for Egyptian potatoes in Germany and the United Kingdom

The European Union ( EU) is the major import market for Egyptian fresh potatoes. Germany and the United Kingdom ( UK) jointly imported about 44% of Egyptian potato exports to the EU during the period 1994-2012. This study sought to identify the determinants of import demand for Egyptian potatoes in these two countries. A general differentiated demand system approach was used to estimate conditional potato import demand per country. For each country, it was assumed that the system of conditional import demand equations for potatoes is specified according to the sources of origin and also depends on all imported potato prices and total import potato expenditure. When estimated econometrically, this import demand model allows conditional price and expenditure elasticities to be derived. The econometric results indicated that with an estimated elasticity of 1.95, Egyptian potato exports responded significantly to total expenditure on imported potatoes by Germany. On the other hand, Egyptian potato exports to Germany did not exhibit significant price responses. In all cases but one, estimated conditional uncompensated price elasticities were not statistically different from zero. However, more interesting results were obtained concerning the price responses of Egyptian potato exports to the UK, whereby the conditional ( uncompensated) direct elasticity of potato imports from Egypt to the UK (-0.71) showed an inelastic response to its own price. Furthermore, Egyptian potato exports seemed to compete on the UK market with potatoes originating from Israel and France, while they displayed complementarity with Dutch imports.

A Demand System Approach to Asset Pricing

We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characterist...

Food demand elasticities for Australia

There is renewed interest in robust estimates of food demand elasticities at a disaggregated level not only to analyse the impact of changing food preferences on the agricultural sector, but also to establish the likely impact of pricing incentives on households. Using data drawn from two national Household Expenditure Surveys covering the periods 1998/1999 and 2003/2004, and adopting an Almost Ideal Demand System approach that addresses the zero observations problem, this paper estimates a food demand system for 15 food categories for Australia. The categories cover the standard food items that Australian households demand routinely. Own‐price, cross‐price and expenditure elasticity estimates of the Marshallian and Hicksian types have been derived for all categories. The parameter estimates obtained in this study represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system for Australia, and all accord with economic intuition.

The quantity and variety of households’ meat purchases: A censored demand system approach

This study investigates the demand for 10 disaggregated meat products by U.S. households. A censored demand system which imposes budget constraints in both observed and latent shares is estimated along with a detailed explanation of the estimation procedure. Additional details about the methodology not provided in previous studies should help researchers to empirically apply the model. An innovation of the study is to introduce the censored demand system model for studying the variety of a household's food purchases. Most households buy between seven and eight different products and hardly change the variety of their purchases with changes in meat expenditure.

DEMAND FOR LOTTERY GAMBLING: EVALUATING PRICE SENSITIVITY WITHIN A PORTFOLIO OF LOTTERY GAMES

This article introduces a new approach to analyzing whether lottery games are complements or substitutes, and whether a portfolio of lottery games is optimally priced. We estimate Barten's synthetic differential demand system for the on-line lottery games operated by the Texas Lottery Commission. The demand system approach imposes theory-consistent demand restrictions that allow identification of parameters for games without price variation. We use the estimated parameters from the Barten model to construct expenditure and price elasticities. Results indicate that on-line games in Texas are generally substitutes for one another and the portfolio of games is not priced to maximize profit.

Competitiveness analysis of Egyptian cotton exports with special focus on the Chinese market

Purpose – The expected growth of China's cotton imports along with Egypt's quest for penetrating new cotton importing markets have together attracted the authors to investigate the competitiveness and the demand for Egyptian cotton in the Chinese market in order to capture the emerging opportunities that Egypt could gain from such a growing market. The paper aims to discuss these issues Design/methodology/approach – The paper employs Balassa's index of revealed comparative advantage and Vollrath's indices of revealed competitive advantage in order to measure the competitiveness of Egyptian cotton exports. An Almost Ideal Demand System (AIDS) approach was then used to estimate demand parameters for Chinese cotton imports from Egypt and major supply sources during the period 1992-2011. Findings – Results show that Egypt has experienced dramatic declines in its cotton comparative advantage over the analyzed period. The estimation results of the AIDS model indicate that Egypt's market share is positively affected by both own and US export prices, but negatively influenced by export prices of other competitors in the Chinese market. Results also indicate that Egyptian cotton is substitutable for cotton imports from all other regions, especially for US cotton. Moreover, additional Chinese expenditure on cotton imports would favor other suppliers. Finally, demand for Egyptian cotton was found to be more sensitive to price changes and there is a greater tendency for China to switch to Egyptian cotton than the other way around should relative prices change. Originality/value – This paper is original and novel in that; despite numerous studies have been done on China's demand for cotton and the several studies have been carried out on export and marketing of Egypt's cotton, the issue of cotton trade between Egypt and China has rarely been empirically examined. Furthermore, our results update important parameter estimates, particularly import demand elasticities of cotton. For Egypt, the study provides useful policy implications that could help policy makers to improve informed decision making with regard topromoting cotton exports to the Chinese market. For China, the study helps understanding the interrelationship between the Chinese cotton market and other emerging exporting markets, while focusing on the Egyptian market.

Testing Structural Changes in the U.S. Whitefish Import Market: An Inverse Demand System Approach

The seafood market has changed substantially in recent decades, becoming increasingly globalized. This has led to introduction of new species and new sources of fish in most markets. We estimate a seafood demand system that, unlike models in previous studies, accounts for potential structural shifts caused by these market changes. We investigate the impact of tilapia as a new species and China as a new source on demand for imported whitefish in the United States. The results indicate that price flexibilities change substantially over time and that the structural shift takes place over a prolonged period.

Household food demand in Turkey: A two-step demand system approach

Demands for sixteen food products are investigated, using data from the Turkish Household Expenditure Survey. The linear approximate almost ideal demand system (LAIDS) is estimated with Shonkwiler and Yen’s two-step procedure. All own-price elasticities are negative and expenditure elasticities positive. Bread, other cereals, bovine, mutton, giblets, and cheese have high expenditure elasticities. Mutton, bovine, and several other protein-rich products are price elastic. Results suggest a mix of gross substitutes and complements, while net substitution is the dominant pattern. Demographic characteristics also play important roles in shaping food demand. The elasticity estimates can inform policy deliberations.