An Estimation of Food Demand in Pakistan Using LA/AIDS
An Estimation of Food Demand in Pakistan Using LA/AIDS
Irfan Ullah and Abbas Ullah Jan
ABSTRACT
This paper aims to examine the food consumption decisions of the urban and rural household in order to understand the demand for different food commodities and to determine the effects of important economic factors such as prices and income. Flexible Linear Approximate Almost Ideal Demand System model is used to estimate food demand patterns using the Household Integrated Economic Survey of Pakistan for the year 2011-12. Food products are categorized into fourteen groups including milk, meat, fruits, vegetables, sugar, beverages, wheat and wheat flour, rice, other cereals, pulses, oil and fats, tea and coffee, backed products and other food. Economic factors such as food commodities price and household’s income and their socio-economic and demographic characteristics are included in the model. Results indicate that with an increase in the age, household consume more of meat, fruit, wheat and wheat flour, pulses, tea and coffee, backed products and other food in urban region and milk, meat, fruits, vegetables, rice, other cereals, pulses, oil and fats, tea and coffee, backed products and other food in rural region. A significant increase in the consumption of meat, fruits, vegetables, rice, beverages, other cereals and backed products is found for married rural household, while fruits, vegetables, sugar, beverages, wheat and wheat flour, rice, other cereals, oil and fats, backed products and other food consumption increases as urban household is married. Results show a significant increase in the consumption of vegetables, sugar, wheat and wheat flour, rice, oil and fats, pulses, tea and coffee and other food with the addition of individuals in the family in both regions. Prices of basic food items such as milk, meat, rice, other cereals, backed products and other food should be kept constant. Imposition of any sale tax could create huge loss in consumption for these commodities. The demand for most of food groups are own price inelastic in both regions except milk, rice, tea and coffee and backed products which are more than unit elastic to own price. Similarly the demand for most of food groups in both regions are less than unit elastic to total expenditures and have positive sign, while the demand for milk, meat, rice, other cereals and other food products are more elastic to total food expenditures (income) both in rural and urban regions. Imposition of income tax in rural and urban low and middle income household could result in huge decrease in the expenditures on these commodities in Pakistan.
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