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Impacts Of Income Changes And Model Specification On Food Demand In Urban China

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  • Liu, Kang Ernest
  • Chern, Wen S.

Abstract

Functional form specification is a crucial task in demand analysis. Four food demand systems for 12 aggregated food items in urban China are estimated and compared using province level data for the period 1992-1999. The results show the expenditure elasticities especially for grain are different based on the functional form selection. According to the measures of forecasting accuracy, we conclude the following: for ex post simulation, the simpler the models, the better the performances, whereas for ex ante forecasting, the more complicated the model, the better the predictions. We further conclude that the LES and QES outperform the LA/AIDS and AIDS. Therefore, model selection should depend on the study purpose. In addition, as urban Chinese household income increases, they will consume more aquatic products, poultry and milk than other foods. This potential trend will certainly benefit the fishery and livestock industries as well as feed grain producers in China or other countries such as Taiwan. However, high own-price elasticities of these three food groups suggest that the profitability of suppliers and traders is very sensitive to price changes.

Suggested Citation

  • Liu, Kang Ernest & Chern, Wen S., 2001. "Impacts Of Income Changes And Model Specification On Food Demand In Urban China," 2001 Annual meeting, August 5-8, Chicago, IL 20466, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea01:20466
    DOI: 10.22004/ag.econ.20466
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    References listed on IDEAS

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    4. Wen S. Chern & Colin A. Carter & Shun-Yi Shei (ed.), 2000. "Food Security in Asia," Books, Edward Elgar Publishing, number 2150.
    5. William F. Hahn, 1994. "Elasticities in AIDS Models: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 972-977.
    6. Chern, Wen S. & Wang, Guijing, 1994. "The Engel function and complete food demand system for Chinese urban households," China Economic Review, Elsevier, vol. 5(1), pages 35-57.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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