Estimates Of Price Elasticities Research Articles

Estimating price elasticity of demand for mineral commodities used in Lithium-ion batteries in the face of surging demand

The accelerating adoption of clean energy technologies is driving demand for certain mineral commodities like lithium, essential for electric vehicle batteries. Understanding the influence of the energy transition on each market requires examining their supply and demand price elasticities. However, there have only been a limited number of studies that have estimated mineral demand price elasticities in emerging technologies. We empirically estimate the price elasticity demand (PEDs) for mineral commodities used in lithium-ion battery cathodes and anodes—cobalt, graphite, lithium, manganese, and nickel. We also test whether the price elasticities of these mineral commodities have changed due to any structural changes in recent years, given the recent expansion in the sales of electric vehicles. Using Two Stage Least Squared (2SLS) econometric techniques, we find that demand has become less elastic for lithium (-0.11), cobalt (-0.45), nickel (-0.09), and manganese (-0.04) after structural breaks in 2020, 2013, 2009, and 2014, respectively. In contrast, demand for natural amorphous graphite (-0.36), and natural flake graphite (-0.58) remains relatively stable over the time period assessed.

Price effects of residents' consumption carbon emissions: Evidence from rural and urban China

Price policy applied to specific products may mitigate consumption carbon emissions (CCE). Nevertheless, the extent to which price effects, such as carbon taxes, differ across income groups and between rural and urban areas in China remains uncertain. With unbalanced provincial panel data from 1999 to 2020, we estimated the demand elasticities of eight major groups of consumer goods and services across income groups separately in rural and urban areas of China, using the Quadratic Almost Ideal Demand System (QUAIDS) and the Exact Affine Stone Index Implicit Marshallian demand system (EASI) in this study. The estimated price elasticities were then used to predict the impact of different price policies on CCE. The results show that taxing the wealthiest individuals and/or subsidizing the poorest individuals in both rural and urban areas have a beneficial impact on the reduction in CCE. Moreover, expanding transfer payments can further facilitate reductions in CCE. Our findings suggest that achieving CCE equality can be realized through intra-urban and intra-rural transfers, as well as urban-rural transfers achieved by taxing urban residents and subsidizing rural residents.

Own price elasticities of the demand for sugar-sweetened beverages in Bangladesh

BackgroundConsumption of sugar-sweetened beverages (SSB) is a major global public health problem. Increasing the price of SSBs through taxation is an effective tool to reduce SSB consumption. Price-elasticity estimates are useful in measuring the effect of taxation on consumption. We estimated the own price elasticities of demand for SSBs in Bangladesh, which will inform how SSB taxes could affect behaviour.MethodsWe used Household Income and Expenditure Survey (HIES) 2016 data, which is a nationally representative dataset at the household level across the country and is conducted using stratified random sampling method. Deaton’s method was used to estimate the price elasticities for SSBs in Bangladesh.ResultsWe found that the own price elasticity for SSBs varied between − 0.53% to -1.17% by types of SSBs in Bangladesh. The price elasticity for soft drinks was − 1.17, indicating that if the price of soft drinks increases by 10% via taxes, the quantity consumed of these beverages would reduce by 11.7%.ConclusionThis is the first study that estimates the own price elasticities of demand for SSBs in Bangladesh. Our results suggest to raise SSB prices through increased taxation in order to reduce SSB consumption and ensure public health gains in Bangladesh.

Understanding the dynamics of dining out food waste: exploring the price effect and heterogeneities

ABSTRACT Dining out food waste has garnered considerable global attention in recent years. This study empirically analyses the impact of food prices on dining out food waste based on a comprehensive micro-survey conducted in China’s restaurants. The primary findings reveal a significant and negative effect of food prices on dining out food waste, largely attributed to a considerable decrease in food ordering quantity and an increased likelihood of packing leftovers. The heterogeneity analyses further underscore the nuanced influence of price intervention, suggesting that strategies targeting high-price restaurants may yield more effective outcomes. Additionally, concerns about potential unintended consequences, such as overeating or obesity, are alleviated by empirical evidence demonstrating that food prices do not significantly affect the quantity of food consumption. However, the estimated price elasticity at the sample mean is inelastic (−0.18), suggesting a potentially substantial welfare loss consumers would face without considering the value of food waste-related externalities. Moreover, the small marginal effect of price also raises doubts about the effectiveness of the food waste disposal fee of restaurants in China.

Evaluation of a carbon tax in Costa Rica linking a demand system focused on energy goods and an input-output model

This study evaluates the impact of a carbon tax on CO2 emissions in Costa Rica. For the above, a demand system is estimated using data from a household expenditure survey, which allows for obtaining the elasticities of demand for various groups of goods focused on energy. Then, the environmental extension of the Leontief price model is implemented to determine the change in prices caused by different carbon tax rates (25, 50, 75, and 100 USD/ton CO2). Subsequently, both models are linked to obtain the variations in production and sectoral emissions. In addition, a Monte Carlo simulation is carried out since the estimated price elasticities have a standard deviation associated with them. The results suggest that carbon taxes mainly affect transportation, while the rest of the sectors have slight impacts in all simulated scenarios. For example, the drop in total CO2 emissions is explained between 89.6% and 91.3% by the decrease in emissions in the passenger transport and other transport sectors with a 95% confidence interval. The previous is explained by the composition of Costa Rica's energy matrix, which has a very high share of renewable energies. Finally, some climate policy options are suggested to contribute to this country's carbon neutrality.

Inflation and distributional impacts: Have mitigation policies been successful for vulnerable and energy poor households?

The aim of this paper is to assess the distributional impact of the 2021–23 price increase on Italian household expenditure and energy poverty. Using the microsimulation model developed by the Italian Parliamentary Budget Office, the analysis provides a comprehensive assessment of the uneven impact of inflation across the population and measures how mitigation policies have compensated for this impact. In particular, we focus on vulnerable households to examine whether energy poverty has been affected by the rise in energy prices and to what extent policies have succeeded in protecting these families. Our main findings show that in 2022, mitigation policies have stabilised the impact of inflation by compensating households for almost half of the effect of the price shock on their expenditure. Although not particularly well targeted at energy-poor households, the mitigation policies have protected households from a worsening of their energy vulnerability. However, the reduction of support measures adopted in 2023 is expected to increase the area of vulnerability, including households that are particularly sensitive to high energy costs. Finally, the behavioural response of households was also considered by estimating price elasticities of energy demand and measuring their impact on the simulated scenarios using a sensitivity approach.

Food for thought: A meta-analysis of animal food demand elasticities across world regions

Animal food products are featured prominently in current debates on dietary transitions. Food demand projections and policy evaluations often draw on expenditure and price elasticity estimates; thus, it is crucial that these elasticities are robust at an adequate product disaggregation, well-founded, and comparable both across products and countries. To the extent of our knowledge, there is no analysis providing meta-elasticities for all world regions, all food groups, and disaggregated animal foods. In this study, we cover this gap and collect a database with more than 50,000 demand elasticities from 444 studies and 87 countries. As 50% of our sample involves animal food products, we are able to provide food demand meta-elasticities for 14 food groups, of which ten are animal food. We present a set of estimated expenditure, own-price, and cross-price; unconditional and conditional; and uncompensated and compensated elasticities; and discuss their policy implications.

Tobacco price elasticity by socioeconomic characteristics in Ecuador.

Smoking is a worldwide epidemic and increased prices are one of the most cost-effective measures to reduce tobacco consumption. This article aims to estimate the price and income elasticity of cigarettes for different population groups in Ecuador. The National Survey of Urban and Rural Household Income and Expenditures (ENIGHUR) 2011-2012 was used, which has information on household cigarette consumption and its sociodemographic characteristics. Deaton's Almost Ideal Demand System, which decouples the effect of quality on the price of the good, was applied. The elasticities were calculated for several groups: urban/rural, income levels (tertiles), education level, sex and age ranges of the household head, and frequency of cigarette purchases in households. The estimated price elasticity nationwide is -0.89 and the income elasticity is 0.41, both statistically significant. Households headed by women (-2.22) are more sensitive to an increase in cigarette prices than those headed by men (-0.65) and households headed by people between 20 and 40 years of age (-2.32) have a higher price elasticity compared to country-level estimations. Differences within other groups are not statistically significant.

Taxing sugar sweetened beverages in Indonesia: Projections of demand change and fiscal revenue.

The global trend of diets high in sugar sweetened beverages (SSB) is associated with a high risk of obesity and non-communicable diseases (NCDs). To reduce SSB consumption on a population level, SSB taxes have become a popular policy solution. In Indonesia, although the prevalence of obesity has doubled in the past decade (11.7% in 2010 to 21.8% in 2018), SSB taxes have not yet been implemented. Utilizing the 2021 Indonesian household socioeconomic survey (SUSENAS), this study estimated price elasticities and projected the plausible effects of implementing an SSB tax on consumers' demand for SSBs and the associated government revenue using the Quadratic Almost Ideal Demand System (QUAIDS) model. Five SSB groups were studied: 1) manufactured liquid milk; 2) sweetened condense milk; 3) instant coffee; 4) tea drinks and fizzy drinks with CO2; 5) fruit juices, "health" drinks, and energy drinks. The overall results showed that the non-milk SSB groups were price elastic. Probing deeper into the substitutions for SSB across categories, we found both substitutionary and complementary effects. Our analysis revealed that increasing SSB prices by 20% would reduce the demand for SSBs on average by 17.5% (14.3%-18.6% for each SSB group) and generate additional state revenue up to IDR 3,628.3 billion per year (approximately US$ 238.5 million or 0.2% of total tax revenue in 2022). Considering the health and economic impacts of high consumption of SSBs, this study provides empirical evidence that imposing taxes on SSBs could be an effective measure to reduce public consumption and to generate tax revenue for financing health programs that address obesity and NCDs in Indonesia.

Responsiveness of market equilibrium agricultural output, price and land use to shocks

AbstractWe assess the responsiveness of market equilibrium agricultural output, price and land use to shocks in agricultural demand, land yield and arable land area and the role of road infrastructure policy in offsetting them. We adapt a partial equilibrium model in the agricultural composite good and lands markets to guide the specification and estimation of a simultaneous equation model (SEM) for agricultural demand, land yield and acreage, and calculate market equilibrium responsiveness. We estimate the SEM by the generalised method of moments three‐stage least squares (GMM 3SLS) using a panel data set of the 10 biggest agricultural producer states in Brazil from 2001 to 2017. Using demand, land yield and acreage price elasticity estimates, we find that Brazil may expand equilibrium agricultural output while preserving its native vegetation land and dampening long‐term agricultural price escalation under a scenario of increasing worldwide demand for food, fibre and fuel and adverse climate shocks. Using acreage and land yield freight rate elasticity estimates, we show how shocks may be offset by road infrastructure policies that reduce freight rates to specific destination states, as they may be designed to induce less equilibrium land use for the same equilibrium output or raise equilibrium output with less equilibrium land use.

Effects of the illicit market on the price elasticity of cigarette consumption in Brazil

BackgroundAn important element to consider in tobacco tax policy is the illicit market of cigarette sales. The objective of this paper is to provide estimates of both conditional and unconditional...

How important are prices in long-haul travel? Evidence from New Zealand

Tourism demand theory postulates that tourists’ incomes, prices in destination countries, and prices in tourists’ countries of origin are key determinants of tourism demand—but must this hold for long-haul travel? We find the answer to be no. By analyzing three international tourist archetypes arriving in New Zealand, a remote island nation, from seven countries, we demonstrate that neither incomes nor prices affect tourism demand in the short run. In the long run, some evidence suggests that tourism demand is income-sensitive; however, it remains insensitive to price changes. We also show that estimates of price elasticities are sensitive to how models are specified and should be interpreted cautiously. The results of this study are broadly relevant to long-haul destinations worldwide.

Estimating own-price and cross-price elasticity of cigarette consumption by price tiers in Bangladesh

ObjectivesThe overall price elasticity of cigarette consumption in Bangladesh has been studied extensively. The estimates of price elasticity by price tiers are not available in the existing literature.MethodsUsing cohort data...

Encouraging the planetary health diet via food taxes and subsidies: a model concept

Abstract Background Several studies simulated the effect of food taxes and subsidies on health and environmental outcomes, but they are diverse and rarely model both health and the environment. Incomplete models’ estimates can be misleading: outcomes can be detrimental in a topic that was not included in the model. The aim of this study is to map the important areas affected by planetary food taxes and subsidies and to build a comprehensive model concept. Methods A systematic literature search database was used to map the areas. An initial model concept was then iteratively redesigned and finalized. Results The main included outcome areas are health, dietary, financial, and environmental outcomes, the latter assessed in diverse areas, like freshwater use, land use, and biodiversity loss. The elements which can greatly influence the model estimates should be carefully assessed, like consumption change, which lies in a central part of the model: included complementary and substitution foods, and consumed diet mass stability is assumed to be more accurate. Health outcomes include the health effects of climate outcomes, affecting not just the modeled region but the whole world population. The input data is scarce, especially reliable price elasticity estimates, and the health effects of climate change. Conclusions The stability of consumed diet mass is still not agreed upon but leads to a biologically more accurate outcome. The inclusion of the health effects of climate outcomes can broaden the picture and emphasize the global nature of our food choices. Input data for building a comprehensive model is currently not optimal, more data are needed on consumption change and the health effects of climate change. The next step for public health could be to model food taxes and subsidies for Europe and to compare the estimates with previous models, also to map the stakeholders’ impressions regarding such a tax and subsidy. Key messages • We need comprehensive models of food taxes and planetary health to make responsible decisions. • A model concept was made which includes important areas and relations between them.

Simulation of the impact of a wine supply management tool: a potential implementation of a climatic reserve in Switzerland

PurposeThis study aims to identify the economic impact of a potential implementation of a Climatic Reserve for the Swiss predominant white grape variety (Chasselas) vinified in the AOC (controlled designation of origin) category. The Climatic Reserve would imply the possibility of harvesting an additional quantity of grapes whose commercialization in wine would be delayed until it is approved by the relevant authority.Design/methodology/approachThe impact of a potential implementation of this wine supply management tool is simulated through an innovative method that combines the vector autoregressive (VAR) model to estimate the influence of the previous consumptions and productions on the current consumption and linear regression [ordinary least square (OLS) method] to estimate the price elasticity to measure the evolution of the price depending on the simulated consumption. The VAR model is based on state-level data about production, stocks, and consumption (all the channels of distribution combined), while the OLS regression for estimating price elasticity uses the retail market data (Nielsen Panel). With the sales and price variables on a monthly frequency design, the latter represents about 40% of the wine market in Switzerland.FindingsAccording to simulations carried out at the level of a region from the canton of Vaud in Switzerland (2000–2018), the increase in turnover linked to the release of the Climatic Reserve would be +3.1% for the indigenous white grape variety Chasselas.Originality/valueThe Climatic Reserve is a wine supply management tool that could complement the existing yield restriction, which does not significantly influence the quantities sold, according to previous studies. Our paper contributes to the literature by demonstrating the economic advantage of this supply management tool to deal with the increasingly frequent climatic hazards in wine production and market. The methodology could be applied to other wine regions (contexts) or other agricultural sectors.

Elderly responses to private health insurance incentives: Evidence from Australia.

Many governments with dual public and private health systems offer subsidies for private health insurance (PHI) with the aim to ease the burden on the public system. Understanding how elderly individuals respond to these PHI subsidies is important because they typically have greater health care needs but often struggle with the affordability of PHI. However, prior studies provide little guidance on this issue because they have mainly focused on the responses to PHI incentives among the general population. This paper leverages a unique age-specific policy intervention in Australia that provided higher rebates for individuals over the age of 65. Using administrative tax data, we examine how this policy affected PHI take-up decisions of elderly individuals under an event study difference-in-differences framework. We find that higher rebates led to a modest increase in PHI take-up. The estimated price elasticities of PHI demand were in the -0.1 to -0.2 range in the first 2years of the policy. Moreover, the demand responses were more elastic among those with low incomes. Our findings indicate that a more targeted subsidy program, specially tailored to low-income elders, would yield greater effectiveness in increasing PHI take-up.

Surge pricing and consumer surplus in the ride-hailing market: Evidence from China

Surge pricing leads to efficient operations of ride-hailing services, but its implications on consumer welfare are difficult to estimate owing to endogeneity biases resulting from the simultaneity between passenger demand and surge pricing. We address this issue and present a comprehensive study on consumer surplus estimation in the ride-hailing market using multi-day data of around two hundred thousand daily ride-hailing trips in Nanjing, China. We estimate a relationship between surge level and demand to obtain the elasticity of passenger demand relative to the surge level. Potential endogeneity issues are addressed by applying the dynamic panel generalized method of moments estimation. The price elasticity estimates are then used to compute the consumer surplus. Our results provide three important insights. First, the magnitude of the surge elasticity of demand during peak hours is the lowest compared to other periods. Second, the magnitude of elasticity is higher in urban areas during the off-peak than in suburban areas. Third, the consumer surplus per kilometer is lower in urban areas due to longer trip lengths at higher surge levels than in suburban areas. The consumer surplus generated by a ride-hailing company per yuan (Y) ranges between Y0.47 and Y0.89. Our findings are relevant for both ride-hailing companies and policymakers. While ride-hailing companies can decide areas, time of the day, and the extent of surge pricing based on the spatiotemporal heterogeneity in price elasticity, government agencies can use consumer surplus as a yardstick to devise pricing regulations.

An empirical analysis of e-cigarette addiction

ABSTRACT This paper examines the role of addiction in influencing the demand for e-cigarettes using the Nielsen Retail Scanner Data and the Nielsen Consumer Panel Data between 2012 and 2017. With a comparison of a myopic addiction model, a forward-looking model, and a rational addiction model, this paper tests whether the consumption of e-cigarettes is addictive and rational. Results from both the macro data and the microdata support the rational addictiveness of e-cigarettes. Applying an OLS method and an instrumental variable method in causal inference, results show that the long-run price elasticity estimates are larger than the estimates of the short-run price elasticity of demand for e-cigarettes. Estimates of both long-run and short-run elasticities are greater than one, −1.50 and −1.05, suggesting e-cigarette demand is elastic in both the long run and short run.

Estimation of income and price elasticities of Indian electricity demand

This study is the first to analyse Indian electricity demand at both the aggregate and sectoral levels between 1981 and 2020. We use a novel autoregressive distributed lag (ADL) cointegration test in the presence of unknown structural breaks. While the income elasticity is close to one in the residential and industrial sectors, it is greater than one in the aggregate and commercial sectors. These results reveal that economy-wide electricity intensity rises with economic expansion in India. The price elasticity is negative and smaller than one in absolute value in the aggregate sector (−0.66), the residential sector (−0.83), and the industrial sector (−0.63), but it is statistically insignificant in the commercial sector. These estimates allow us to provide sector-specific information for policy design and implementation in the power market.

A structural analysis of physician agency and pharmaceutical demand.

This paper examines the significance of physician agency in medical providers' prescription choices. Physician agency is considered as medical providers' responses to the price and markup percentage of prescription drugs. Their preferences are allowed to be heterogeneous using a random coefficient logit model. Using a sample of anti-diabetic prescriptions with metformin from a population-based database in Taiwan, empirical results reveal that physician owners, privately-owned medical providers, small medical providers and the medical providers facing less competition are more likely to prescribe drugs with higher profit margins. The aggregate pharmaceutical demand is also found to increase with the markup, which is allowed to be endogenous in the estimation. Price elasticity estimates suggest medical providers are quite responsive to pharmaceutical price changes in Taiwan. Counterfactual analysis reveals the potential impact of physician agency is economically significant. Removing markups and lowering pharmaceutical prices are found to be more welfare enhancing than restricting physicians' dispensing services.