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A latent variable model of consumer taste determination and taste change for complex carbohydrates

  • X. M. Gao
  • Timothy Richards
  • Albert Kagan

Despite evidence that aggregate consumption of complex carbohydrates has risen over the last decade, food consumption surveys suggest that fewer households are consuming less bread, pasta rice, potatoes and corn. This paper estimates systems of complex carbohydrae demand using cross-sectional data from 1977-78 and 1987-88 in order to explain this paradox. Changes in demand that are not explained by changes in prices or income are explained by variations in taste. Because tastes cannot be directly observed, the paper uses a multiple indicator and multiple cause (MIMIC) model to construct a suitable proxy variable. In the MIMIC approach, the 'indicators' are residuals from a household demand function that includes prices and incomes as explanatory variables, while household and demograhic proxies are 'cause' variables. The objectives in applying the MIMIC model are to determine the effect of consumer tastes on complex carbohydrate demand and, comparing cross-sectional survey data from two different periods, test the hypothesis that these tastes change over time. The data consist of US complex carbohydrate prices and expenditures, taken from the USDA Household Food Consumption Surveys in 1977-78 and 1987-88. The results show that structural changes in demand, or those that are not explained by changes in price, income, or the cause variables, led to an increase in complex carbohydrate demand of 5% from 1977-78 to 1987-88. However, changes in demand explained by the cause variables cause demand to fall by 9%.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 29 (1997)
Issue (Month): 12 ()
Pages: 1643-1654

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Handle: RePEc:taf:applec:v:29:y:1997:i:12:p:1643-1654
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  1. Lewbel, Arthur, 1985. "A Unified Approach to Incorporating Demographic or Other Effects into Demand Systems," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 1-18, January.
  2. Cowen, Tyler, 1989. "Are all tastes constant and identical? : A critique of Stigler and Becker," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 127-135, January.
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  8. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  9. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-15, July.
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  13. Heien, Dale & Wessells, Cathy Roheim, 1990. "Demand Systems Estimation with Microdata: A Censored Regression Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 365-71, July.
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  16. Chalfant, James A & Alston, Julian M, 1988. "Accounting for Changes in Tastes," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 391-410, April.
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