An Analysis of Meat Demand System using Multi-stage Budgeting Model

This study introduces the theoretical background and estimation method of the multi-stage budgeting model, which has not yet been applied in Korea. It uses the model to estimate the meat demand system. Specifically, it classifies meat into three groups (beef, pork, and chicken) and eight differentiated products(domestic, imported frozen, imported chilled, etc.). Using annual data from 1996 to 2019, it reconstructs the entire meat demand system by estimating the demand functions within a group and between groups. The estimates show that the total expenditure (income) elasticities are significant and greater than 1, suggesting that all meat products are luxuries as in previous studies. In addition, this study confirms that the substitution effects between domestic meats are much greater than those between domestic and imported meats. And pork and chicken are estimated as complementary goods due to their higher income effects than substitution effects. This study has significance not only in that it provides meat demand information (elasticities) necessary to analyze the impact of trade liberalization on producers and consumers' welfare and to forecast meat markets, but also it introduces the multi-stage budgeting model to Korea.