Demand System Model Research Articles

Household Demand for Plant-Based Protein Foods During the COVID-19 Pandemic

This study was conducted to investigate the demand for plant-based protein foods among households during the COVID-19 pandemic. A multistage sampling technique was used to select 1000 households from ten Local Government Areas in Lagos State, Nigeria. The data collected were analyzed using descriptive statistics and a censored Quadratic Almost Ideal Demand System model. Households were categorized into non-poor, moderately-poor and core-poor using the FGT index. The study found that during the COVID-19 pandemic, though non-poor households had a higher expenditure on plant protein foods than both the moderately-poor and core-poor households, the moderately-poor and core-poor households, however allocated higher shares of their total food expenditure share on plant protein foods than the non-poor households. The result also showed that, while cowpea and groundnut were considered to be necessities for all households, soybean, lentils, and pigeon pea, were necessities for the core-poor households. The study therefore recommended that during periods of crisis, soybean, lentils, and pigeon pea should be made available for core-poor households because these households consider them to be very important in their diet and thus, will still purchase them even in the face of price shock.

Price elasticity of demand for ready-to-drink sugar-sweetened beverages in Brazil.

The taxation of sugar-sweetened beverages is a policy that has been adopted in many countries worldwide, including Latin American, to reduce sugar consumption. However, little is known about how taxation on these products may affect their demand. The present study aims to estimate the price elasticity of demand for sugar-sweetened beverages in Brazil. This study advances the literature by proposing a breakdown between ready-to-drink sugar-sweetened beverages and sugar-sweetened beverages that require some preparation before being consumed. With this disaggregation, it is possible to obtain more accurate elasticities for the group of products that will be effectively taxed. We estimated a Quadratic Almost Ideal Demand System (QUAIDS) model using the Household Budget Survey 2017-2018 microdata. The results show that ready-to-drink beverages is more consumed but less sensitive to changes in price than prepared beverages. The price elasticity of demand for ready-to-drink and prepared sugar-sweetened beverages was -1.19 and -3.38. Additionally, we observe heterogeneity in these price elasticities across household incomes, with a more elastic demand among lower-income households for ready to drink beverages. The findings suggest that taxing ready-to-drink sweetened beverages could potentially reduce sugar consumption directly through a decrease in the consumption of sugary drinks and this effect could be reinforced by reducing the consumption of other sugar-rich products. Therefore, the taxation police should effective contribute to minimize health risks associated to the sugar consumption.

An error-corrected linear approximate almost ideal demand system model for imported meats and seafood in Indonesia

The use of static-demand systems in empirical analysis assumes that consumers adjust immediately to a new long-run equilibrium path when a shock is encountered. However, adjustment is not always instantaneous. This paper utilizes an Error-Corrected Linear Approximate Almost Ideal Demand System (EC-LAAIDS) model to analyze the import demand for meat and seafood in Indonesia from 1976 to 2020 using annual data. The study found that the theoretical restrictions of homogeneity and symmetry held in the EC-LAAIDS model but did not in the long-run model. The adjustment parameter reveals that imported mutton had the slowest adjustment to long-run equilibrium, while all other meats and seafood had a moderate adjustment speed. The study calculated income elasticities for both the short- and long-run revealing that imported beef was a luxury good in the short-run and most responsive to changes in income. In the short-run, imported poultry was the least responsive to changes in income. In the long-run, all imported meats were found to be luxuries except for imported seafood and beef. Uncompensated price elasticity of demand reveals that in the short-run all imported items had inelastic demand except for imported beef which had elastic demand. In the long-run, however, imported beef and pork had elastic demand, while all other items were inelastic. Compensated cross-price elasticities found that mostly substitution relationships existed among pairs of imported commodities. Finally, a few policy suggestions were discussed, such as production subsidies to producers.

Food consumption patterns in dense coastal settlements of Kendari City, Indonesia

Food consumption is a basic human need, the most basic part of the welfare of society. In general, the food needs of low-income people have not been fully met. The purpose of this study was to study food consumption patterns in low-income people (LIP) in the coastal area of Kendari City. The population is LIP who receive social assistance in 2021. The total sample is 120 households, which were selected using the simple random sampling method. The analysis uses the Almost Ideal Demand System (AIDS) model with the parameter estimation method using Seemingly Unrelated Regression (SUR). The results showed that partially, commodity price variables and respondent’s characteristics had an effect on food expenditure, except for the age variable. The price elasticity of demand for all commodities is negative, according to the theory of demand, except for vegetables, which are positive. The value of income elasticity for all commodity groups is positive, where food sources of carbohydrates tend to be inelastic and the demand for vegetables and side dishes is elastic. In general, the response to changes in cross-demand between commodities shows that there are commodities that are mutually complementary and some are complementary.

Exploring the potentials of underutilised indigenous legume for nutritional welfare of rural households in the Northern Part of Oyo State Nigeria

This study analyzed the nature of household demand and the factors that determined household demand for pigeon pea in Oyo State, Nigeria. A multistage sampling technique was employed to select 150 households. Primary data were collected using a structured questionnaire and analyzed using descriptive statistics and Almost Ideal Demand System (AIDS) model. The results of the study showed that the majority(87.3 %) of the sample household were male-headed, married (80 %), between the ages of 40 and 60 years, with a mean household size of nine persons, and their primary occupation was farming. On average, households consumed 2.1 kg of pigeon pea per month and the household head earned ₦460,000 ($1150) per annum. The result of the AIDS model showed that pigeon pea was a normal and necessary food, and as well as complementary food for tubers and cereals. Further, household head’s age, formal education and pigeon pea attributes (taste and cooking time), significantly influenced household’s demand for pigeon pea. Research efforts should, therefore, be tailored towards improved varieties with less cooking time, better taste and awareness creation of its nutritional value to increase production, marketing and consumption for improved nutrition security in the study area.

Estimating Household Price and Income Elasticities for Animal-Sourced Food: The Case of Bengkulu Province, Indonesia

Bengkulu is one of the provinces in Indonesia where household protein consumption is still below the national protein recommended allowance. This paper examines the effect of price, income and socio-demographic factors on household demand using the Quadratic Almost Ideal Demand System (QUAIDS) model and data from the Indonesian National Socio-Economic Survey (Susenas) in March 2021, which includes 5,079 households. The QUADS parameters were estimated using the Iterated Nonlinear Seemingly Unrelated Regression technique with theoretical restrictions imposed. The estimated parameters from the model were utilized to derive price and income elasticities for animal-derived foods. Empirically, it was found that fish is the most elastic animal-sourced food with a demand elasticity of 4.44%, followed by beef (2.78%), milk (1.94%), poultry (1.54%), and eggs (0.82%). Fish substitutes for beef, chicken, and eggs when prices increase but is complementary to milk. Four animal-sourced food groups, namely fish, beef, milk, and poultry, are luxury items, with income elasticities of 2.57%, 2.39%, 2.22%, and 1.36%, respectively. In contrast, eggs were found to be a normal good with an income elasticity of 0.53%. Fish and beef are very elastic; thus, the government can use pricing strategies and implement policy to increase poultry and eggs production so that daily protein requirements of 57 grams per capita per day are reached in Bengkulu province.

Estimating Demand for Imported Food Categories in Iraq

Iraq is highly dependent on international markets to provide food for its residents. As imported food prices are highly dependent on crude oil prices in global markets, any shock in oil prices will have an impact on food consumption in the country. As a result, it is essential to study the demand for imported food at every time period. To the best of our knowledge as researchers, as not even a single study is available in the literature, this paper is considered the first to study the demand for imported food groups in Iraq. Therefore, the main objective of this research is to estimate demand elasticities for several imported food categories in Iraq. This study uses an Almost Ideal Demand System model to analyze the demand for imported food in Iraq from 1980-2003 and 2003-2020. Data are collected from secondary resources. The main results show that some food categories become demand inelastic after they were demand elastic in the first period. In contrast, demand for some food groups become more price sensitive in the second period after it was less price sensitive in the first period. There are also changes in some food categories after they became luxuries in the second period. The findings of this study provide valuable insights into the changing dynamics of food import demand in Iraq and have policy implications by helping the decision-makers to invest more in the local production of some food groups.
 Paper type: Research paper

The pattern of healthy diets and zero hunger among households in South-West Nigeria: application of linear approximation to quadratic almost ideal demand system.

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.

On the robustness/replication of econometric analyses from nonlinear models using various commonplace software packages

AbstractBecause replicability is an important part of every scientific endeavor, this research deals with comparing and contrasting parameter estimates, standard errors, and p‐values from the estimation of five commonly encountered nonlinear models in applied econometrics. Commonplace software packages indigenous to econometrics and statistics are used, namely EVIEWS 11.0, SAS 9.4, Stata 17, and R 4.1.2 in five replication exercises to determine potential differences, if any, in empirical results. The hypothesis that mainstream software packages generate different empirical results in the estimation of nonlinear models is confirmed for the polynomial distributed lag (PDL) model and the GARCH(1,1) model. For the probit model and the Barten synthetic demand system model, the differences in parameter estimates, standard errors, and p‐values are less evident across the four commonly used software packages. For the Tobit model, the respective sets of parameter estimates, standard errors, and p‐values are nearly identical across the respective software packages. Economic analysts should not just accept estimation results uncritically, but instead, conduct sensitivity analyses involving the use of at least two software packages. The agricultural economics profession should adopt this recommendation as standard practice.

Demand analysis with structural changes: Model and application to the US blueberry market

AbstractThis study proposes a generalized demand system accommodating structural changes endogenously and examines how increasing imports affect blueberry prices and shipment values in the US market. Specifically, we integrate a smooth transformation function into the nested synthetic inverse demand system model (SIDS). We show that the proposed approach performs better than the standard SIDS in the context of structural changes in imports in the US blueberry market. As the largest blueberry producer in the world, the United States has supplied half of the world's blueberries over the past decade. Imported blueberries from South American countries do not have large impacts on the US blueberry industry due to the difference in production seasons. But the fast‐growing imports from Mexico have had great impacts on the US market. Our simulation shows that a 100% increase in Mexican blueberry shipments will result in a loss of $20 million in US domestic production. [EconLit Citations: Q11, Q17].

The rebound effect of decarbonization in China’s power sector under the carbon trading scheme

China mainly promotes economic decarbonization through the carbon trading scheme (ETS) at this stage. The power sector is the most critical in this process. ETS can promote decarbonization in the power sector, but due to the rebound effect, the actual decarbonization effect may not be as expected. This study systematically investigates the rebound effect of decarbonization in China’s power sector under ETS using an almost ideal demand system (AIDS) model and simulation analysis method. The results show that the implementation of ETS had a partial rebound effect on decarbonization in China’s power sector, with magnitudes ranging from 0.186 to 0.866. Furthermore, this study found a strong correlation between the rebound effect and carbon prices; specifically, the lower the carbon price, the greater the rebound effect. Finally, the rebound effect of decarbonization in China’s power sector under ETS is dominated by the indirect rebound effect. These findings suggest that policymakers should consider the rebound effect when formulating or improving policies related to the decarbonization of China’s power sector and assessing the effectiveness of the current ETS. Moreover, taking steps to increase carbon prices would help mitigate the rebound effect.

An Investigation into the Farm Households Consumption Patterns in Punjab, Pakistan

In the present study, the consumption data of paddy and wheat growing farm households were analysed using the Almost Ideal Demand System (AIDS) model, incorporating the household composition in addition to the usual price/income variables. Although the general restrictions of demand theory were rejected, the overall results were not seriously out of line of a priori expectations. All the own-price elasticities were negative and most of them were significant. Paddy and wheat were found to be gross complements in consumption whereas meat and pulses emerged as gross substitutes. Dairy products and meat were regarded as luxuries by the sample farm households and expenditure on these items was curtailed in response to any addition to household size. Significant quantitative dietary impacts were found associated with change in the age composition of farm households. A more detailed analysis of consumption behaviour of rural families may be merited; this may explore alternative groupings of consumption goods, additional socio-economic factors or use of panel data.

The Role of Income and Food Prices in Diet-Related Greenhouse Gas Emissions in China: A Path towards a Sustainable Diet.

China has undergone rapid economic growth and diet transition over the past decades, along with environmental challenges. To help to achieve carbon peaking by 2030, this study investigates the time-variable diet-related greenhouse gas emissions (GHGEs) from 2000 to 2020 and examines the responses of food demands and diet-related GHGEs to an increase in per capita income and animal-based food prices. Based on the Almost Ideal Demand System model, addressing the problem of the endogeneity of food expenditure, we estimate the demand elasticities for six food groups and analyze their changing trends with time. Then, we perform two projections. One is to project the impacts of income growth on food demands and diet-related GHGEs, taking into consideration dynamic income elasticities as per capita income increases; the other is to project the effects of an increase in prices of different animal-based foods on food demands and diet-related GHGEs. Our results reveal that diet-related agricultural GHGEs show a continued increase in the short term, but the increased effect tends to decline gradually. The dominant driver of increased diet-related GHGEs is the increased consumption of beef, mutton, and pork. However, an increase in prices of beef and mutton; pork; and poultry and eggs can reduce diet-related GHGEs, while a decrease in the prices of aquatic products can also deliver a significant decrease in GHGEs. The results imply that policymakers should take an interest in the environmental impacts of diet transition and promote a more sustainable diet structure.

Investigation of the Effect of Natural Disasters on Household Demand Using an EASI Demand System

In recent centuries, many natural disasters such as floods and droughts have appeared and have had many adverse effects on many countries. Natural disaster is one of the major environmental challenges in the world and has serious socioeconomic consequences in countries. Evidence points to the fact that these natural disasters have a significant negative impact on crop yield, food security, there is a need to conduct micro-level studies that help generate empirically evidence on the effect of such disasters on the indicators of households demand in developing countries. Iran is one of the most disaster-prone regions in the world. Natural disasters frequently impact it and cause devastating damage. Depending on their intensity and duration, these disasters can impact consumer demand. Therefore, this study examines the effects of floods on food and non-food demand in Iran from 2019 to 2020. For this purpose, ‌the EASI demand system model was used to analyze. The data were obtained from the Statistical Center of Iran and covered urban and rural households in five provinces of Fars, Khuzestan, Mazandaran, Lorestan, and Golestan. The results show that households who experience the shock of floods reduce food, energy, and hotel and restaurant demand while increasing transportation, home appliance, and health demand.

Impacts of African Swine Fever on Structural Change in China’s Meat Demand

In 2018, African Swine Fever (ASF) first broke out in China and had a noticeable effect on China’s pork market and the entire meat market. This paper models China’s meat market, including pork, beef, mutton, and poultry, and examines how the outbreak of ASF impacts structural changes in China’s meat demand. We use the inverse almost ideal demand system (IAIDS) model and employ province-level meat consumption and price data to form the panel data set of 30 provinces of China from 2015 to 2020. Our results indicate that ASF has a significant impact on the demand for pork, poultry, and mutton. Based on the estimated price flexibilities and scale flexibilities, we find that the outbreak of ASF impacts structural change in China’s meat demand. Furthermore, our results show the heterogeneity of the ASF’s effects across different provinces in China.

How would the carbon tax on energy commodities affect consumer welfare? Evidence from China's household energy consumption system.

Although carbon tax policies can effectively restrain energy consumption and reduce pollution, they will also affect the welfare of residents through a price mechanism. We explore the impact of energy price increases that are caused by possible carbon tax policies on the welfare of residents in China with a quadratic almost ideal demand system (QUAIDS) model. The estimated elasticities show that the income elasticity of coal demand is -0.741 for urban residents, compared to 0.392 for rural residents. The cross-price elasticity shows that China's residential energy consumption has moved up the clean energy ladder. Based on the above reliable elasticity estimates, the welfare effects are analyzed in the residential consumption system. The overall welfare loss for residents increases with the level of carbon tax. A carbon tax on all energy sources is a regressive policy for China, and when the carbon tax rate reaches the world average, of 30 USD/tCO2e, the welfare loss for low-income and high-income residents is 1.55% and 0.62% respectively. However, the separate imposition of carbon taxes on different energy sources shows the heterogeneity of the welfare impacts of carbon taxes. At the national and urban levels, the distribution effects of carbon taxes are regressive for coal, LPG, and electricity, progressive for gasoline, and distributional neutral for natural gas. In rural areas, however, the welfare distribution effect of the carbon tax on diesel, LPG, and natural gas are progressive, and the welfare effects of carbon taxes on electricity show an inverted U-shaped distribution. Our findings are conducive to the development of a differentiated carbon tax policy by the Chinese government.

Validating LA/AIDS model in the food market of Pakistan

The study aims to conduct a consumer demand analysis of the food market of Pakistan by estimating its own price and cross-price elasticities. This study also examines expenditure and income elasticities to show the influence of relative change in price, total expenditure, and income on the relative change in demanded quantities of the selected food products. The study takes meat, vegetables, fruits, and pulses as different food baskets and estimates income elasticities, including uncompensated (Marshallian) and compensated (Hicksian) own price and cross-price elasticities. The findings are concluded based on Marshallian elasticity as it provides more accurate images of substitutes and complements compared with Hicksian elasticity. The study applies the Linear Approximate Almost Ideal Demand System model to estimate the results by acquiring data from a household integrated economic survey of Pakistan from 2018 to 2019. The findings of expenditure elasticity (uncompensated own price elasticity) reveal that vegetables and pulses are normal (inelastic) goods, whereas meat and fruits are luxury (elastic) goods. The results of uncompensated cross-price elasticities reveal that vegetables and meat, and vegetables and fruits are substitutable commodities. In addition, pulses and vegetables, and pulses and meat are complementary goods. The study suggests fruitful implications for food policymakers.

Implementation of demand system restrictions and accuracy of QUAIDS model estimator on animal food demand in Indonesia

Demonstration on restrictions and accuracy of an estimator is pivotal since the incomplete restrictions will make the estimator inaccurate that they cannot be used for the need of decision making. In this study, the demand system’s three primary requirements-adding up, homogeneity, and symmetry ‒ are examined. This current research was intended to demonstrate restrictions and accuracy of Quadratic Almost Ideal Demand System (QUAIDS) model estimator. The source of the data was referred to the results of National Socio-Economic Survey of Indonesia in 2016, involving 291,414 households in total. Iterated Nonlinear Seemingly Unrelated Regression method was used for the estimation procedure. Parameter estimation is used to calculate the elasticity of animal protein. The results have indicated that the three restrictions of the QUAIDS model estimator, i. e. adding up, homogeneity, and symmetry, have been completed. Further, the estimation made by the QUAIDS model is valid and efficient; therefore, the estimation is potentially used as a means of calculating own and cross price elasticity, either Marshallian or Hicksian. In addition, some other parameters, such as price, income, and income squared, are also employed to calculate income elasticity. The findings show that demand is elastic for all animal proteins, except for eggs, which are inelastic. Beef is most elastic. According to the income elasticity results, all animal proteins are considered luxury foods in Indonesia, except for eggs, which have an income elasticity of less than one. To fulfill Indonesian households’ needs for animal protein, the income policy is more suited for beef, while the price strategy is more effective for animal proteins including chicken, milk, fresh fish, and eggs

How Does Income Heterogeneity Affect Future Perspectives on Food Consumption? Empirical Evidence from Urban China.

China is undergoing a rapid dietary transition as well as a changing income distribution. In this paper, we examine the impacts of income heterogeneity on the prediction of food consumption using a dataset that covered 22,210 urban households in China’s 6 provinces. The two-stage Exact Affine Stone Index Implicit Marshallian Demand System (EASI demand system) model, which deals with the problem of censoring and endogeneity, is applied to estimate demand elasticity across income strata. Additionally, a dynamic simulation method considering income heterogeneity is conducted to predict future food consumption trends. The results reveal that income elasticity follows a decreasing trend with income growth. Furthermore, the results show that the consumption of major food items in the 15th period will increase by 7.9% to 42.0% over the base period. The growth potential of low-income groups is significantly higher than that of middle- and high-income groups. However, the prediction results may be overestimated if the differences in consumer behavior across income groups and the dynamic simulation procedure are not taken into account. Our study indicates that the consumption features of different income groups need to be included in food consumption forecasts. Moreover, the government should formulate food policies for different income groups to promote a sustainable food system transformation.

Application of the Almost Ideal Demand System (AIDS) Model in the Demand of the Household Commodity Group in Jordan

In this study, we provide estimates of An Almost Ideal Demand System (AIDS), as reflected in the demand analysis for Jordan: the free, the homogeneous, the symmetric, and the restricted AIDS models were estimated. The evaluated total expenditure elasticities indicate that the demand for food and housing is inelastic concerning total expenditure (income), whereas the demand for all the other commodity groups is elastic. The uncompensated own-price elasticities indicate that demand for food and clothing items is inelastic and inelastic for all other commodity groups. One striking result was that the own-price elasticity for food seems to be relatively very large compared to the estimated for other countries. Based on the log-likelihood ratios, homogeneity and symmetry given homogeneity for the whole system were rejected. These findings suggest that the demand for aggregate commodity groups in Jordan is not consistent with the theory of demand