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Estimation of food demand parameters in Ethiopia: A Quadratic Almost Ideal Demand System (QUAIDS) approach

Author

Listed:
  • Mauro Vigani

    (University of Gloucestershire)

  • Hasan Dudu

    (World Bank, Washington,D.C. (United States))

  • Gloria Solano-Hermosilla

    (European Commission JRC)

Abstract

In this study we analyse the structure of food demand in Ethiopia to better understand the evolution of food demand under volatile prices and household income vulnerability. In particular, this report aims to estimate the income and price elasticities of the demand of main agricultural and food commodities for Ethiopian households by using state of the art methods and recent data to inform the policy making process with better information. The income and price elasticities measure the responsiveness of quantity of food demanded to changes in income and prices, respectively, and hence contribute to the discussions about policies related to food security. Further, they are important inputs for structural models that are developed by the JRC to support the stakeholders in Ethiopia on nutrition and food security. Using a QUAIDS approach controlling for the potential endogeneity of both expenditure and prices and data from the 2015-2016 Ethiopian Socioeconomic Survey/LSMS-ISA, we find that cereals and animal products are superior (luxury) goods relative to other crops and manufactured food products that appear to be basic necessities. Further, cereals and animal products are elastic to price changes with high substitution effect, while manufactured foods and other crops are inelastic and unit elastic respectively to price changes with low substitution effect, thus confirming their status of essential foods for Ethiopian households. Finally, expenditure elasticities at regional level show a similar pattern that the national one, but price elasticities vary across regions.

Suggested Citation

  • Mauro Vigani & Hasan Dudu & Gloria Solano-Hermosilla, 2019. "Estimation of food demand parameters in Ethiopia: A Quadratic Almost Ideal Demand System (QUAIDS) approach," JRC Research Reports JRC117125, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc117125
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    References listed on IDEAS

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    1. Kamel Louhichi & Umed Temursho & Liesbeth Colen & Sergio Gomez y Paloma, 2019. "Upscaling the productivity performance of the Agricultural Commercialization Cluster Initiative in Ethiopia [Élargissement des performance de productivité de l'Initiative des grappes de Commerciali," Working Papers hal-02790390, HAL.

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    Keywords

    food income and price elasticities; QUAIDS; Ethiopia; Socioeconomic Survey/LSMS-ISA;
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