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Estimation of Own- and Cross-price Elasticities using Unit Values: Econometric Issues and Evidence from Urban Ethiopia

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  • Abbi Mamo Kedir

Abstract

In Sub-Saharan Africa, estimation of price elasticities using budget surveys is almost non-existent. In this study, own- and cross- price elasticities have been estimated from spatial variation in prices for six food groups using the 1994 Ethiopian Urban Household Survey. Following earlier work, we relate budget shares and unit values (i.e., the ratio of total household expenditure to quantity purchased) to the logarithms of prices, incomes and other relevant household characteristics. As expected, the food commodity groups have inelastic demand but only one third of the commodity groups have statistically significant own-price elasticities. We found also the presence of complementarity and substitution between the commodities but statistically significant results were obtained only for a very few number of the food items. To test the validity of within-cluster methodology used in earlier work, our estimates have also been compared with estimates obtained using actual/market prices. Our results compare well with findings elsewhere. Copyright 2005, Oxford University Press.

Suggested Citation

  • Abbi Mamo Kedir, 2005. "Estimation of Own- and Cross-price Elasticities using Unit Values: Econometric Issues and Evidence from Urban Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 14(1), pages 1-20, March.
    • Handle: RePEc:oup:jafrec:v:14:y:2005:i:1:p:1-20
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    Cited by:

    1. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
    2. Arthur, Maria de Fátima S.R. & Bond, Craig A. & Willson, Bryan, 2012. "Estimation of elasticities for domestic energy demand in Mozambique," Energy Economics, Elsevier, vol. 34(2), pages 398-409.
    3. Amita Majumder & Ranjan Ray & Sattwick Santra, 2019. "The Calculation of Spatial Prices in the Absence of Unit Values: Alternative Methodologies with Empirical Evidence from India," Monash Economics Working Papers 12-18, Monash University, Department of Economics.
    4. Manisha Chakrabarty & Amita Majumder & Ranjan Ray, 2018. "A Framework for the Simultaneous Measurement of Spatial Variation and Temporal Movement in Prices in a Heterogeneous Country: The Dynamic Household Regional Product Dummy Model," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 703-730, September.
    5. Kavitha, V. & Umanath, M. & Paramasivam, R. & Chandran, K., 2016. "Determinants of Consumption Probability and Demand for Fruits in India," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(Conferenc).
    6. Worku, Ibrahim & Tafere, Kibrom, 2012. "Consumption patterns of livestock products in Ethiopia: Elasticity estimates using HICES (2004/05) data," ESSP research notes 16, International Food Policy Research Institute (IFPRI).
    7. Manisha Chakrabarty & Amita Majumder & Ranjan Ray, 2015. "Preferences, Spatial Prices and Inequality," Journal of Development Studies, Taylor & Francis Journals, vol. 51(11), pages 1488-1501, November.
    8. Charles Ackah, & Simon Appleton, 2007. "Food Price Changes and Consumer Welfare in Ghana in the 1990s," Discussion Papers 07/03, University of Nottingham, CREDIT.
    9. Vincent Leyaro & Oliver Morrissey & Trudy Owens, 2010. "Food prices, tax reforms and consumer Welfare in Tanzania 1991–2007," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(4), pages 430-450, August.

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