IDEAS home Printed from https://ideas.repec.org/p/ags/aaea13/149248.html
   My bibliography  Save this paper

Subsidizing Fruits and Vegetables by Income Group: A Two-Stage Budgeting Approach

Author

Listed:
  • Niu, Luyuan
  • Wohlgenant, Michael

Abstract

This paper investigates how a price subsidy affects demand for the three fruit and vegetable products for two income groups of households. This study combines the results of conditional elasticity estimates from previous study and develops a two-stage budgeting approach to estimate demand for fruits and vegetables using 1986-2010 quarterly CEX data. Precise stand errors are estimated by bootstrapping the entire two-stage estimation procedures. Results show that low-income households have larger total expenditure elasticities but smaller unconditional price elasticities than high-income households. Fruits and vegetables and all other goods are found to be net substitutes. Assuming that supplies for fruits and vegetable are perfectly elastic, a 10% price subsidy increases consumption of processed fruits and vegetables, fresh vegetables, and fresh fruits by 3.27% (10.68%), 3.29% (10.73%) and 3.50% (11.42%) for low-income (high-income) households, and only causes a small change in consumption of all other goods.

Suggested Citation

  • Niu, Luyuan & Wohlgenant, Michael, 2013. "Subsidizing Fruits and Vegetables by Income Group: A Two-Stage Budgeting Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149248, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:149248
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/149248
    Download Restriction: no

    References listed on IDEAS

    as
    1. Derek Byerlee & Alain de Janvry & Elisabeth Sadoulet, 2009. "Agriculture for Development: Toward a New Paradigm," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 15-31, September.
    2. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
    3. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-1248, September.
    4. Sherlund, Shane M. & Barrett, Christopher B. & Adesina, Akinwumi A., 2002. "Smallholder technical efficiency controlling for environmental production conditions," Journal of Development Economics, Elsevier, vol. 69(1), pages 85-101, October.
    5. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
    6. Rahman, Sanzidur, 2009. "Whether crop diversification is a desired strategy for agricultural growth in Bangladesh?," Food Policy, Elsevier, pages 340-349.
    7. Subal C. Kumbhakar & Gudbrand Lien & Ola Flaten & Ragnar Tveterås, 2008. "Impacts of Norwegian Milk Quotas on Output Growth: A Modified Distance Function Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(2), pages 350-369, June.
    8. Hung-Jen Wang, 2002. "Heteroscedasticity and Non-Monotonic Efficiency Effects of a Stochastic Frontier Model," Journal of Productivity Analysis, Springer, vol. 18(3), pages 241-253, November.
    9. Stevenson, Rodney E., 1980. "Likelihood functions for generalized stochastic frontier estimation," Journal of Econometrics, Elsevier, vol. 13(1), pages 57-66, May.
    10. Llewelyn, Richard V. & Williams, Jeffery R., 1996. "Nonparametric analysis of technical, pure technical, and scale efficiencies for food crop production in East Java, Indonesia," Agricultural Economics, Blackwell, pages 113-126.
    11. Ani L. Katchova, 2005. "The Farm Diversification Discount," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 984-994.
    12. Giannis Karagiannis & Vangelis Tzouvelekas, 2009. "Measuring technical efficiency in the stochastic varying coefficient frontier model," Agricultural Economics, International Association of Agricultural Economists, vol. 40(4), pages 389-396, July.
    13. Ariel Dinar & Giannis Karagiannis & Vangelis Tzouvelekas, 2007. "Evaluating the impact of agricultural extension on farms' performance in Crete: a nonneutral stochastic frontier approach," Agricultural Economics, International Association of Agricultural Economists, vol. 36(2), pages 135-146, March.
    14. Antonio Alvarez & Christine Amsler & Luis Orea & Peter Schmidt, 2006. "Interpreting and Testing the Scaling Property in Models where Inefficiency Depends on Firm Characteristics," Journal of Productivity Analysis, Springer, vol. 25(3), pages 201-212, June.
    15. Jean-Paul Chavas, 2011. "Agricultural policy in an uncertain world," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 38(3), pages 383-407, August.
    16. Fahim Al-Marhubi, 2000. "Export diversification and growth: an empirical investigation," Applied Economics Letters, Taylor & Francis Journals, vol. 7(9), pages 559-562.
    17. Coelli, Tim & Fleming, Euan, 2004. "Diversification economies and specialisation efficiencies in a mixed food and coffee smallholder farming system in Papua New Guinea," Agricultural Economics, Blackwell, vol. 31(2-3), pages 229-239, December.
    18. Hajargasht, Gholamreza & Coelli, Tim & Rao, D.S. Prasada, 2008. "A dual measure of economies of scope," Economics Letters, Elsevier, vol. 100(2), pages 185-188, August.
    19. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    20. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    21. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-272, May.
    22. Kumbhakar,Subal C. & Lovell,C. A. Knox, 2003. "Stochastic Frontier Analysis," Cambridge Books, Cambridge University Press, number 9780521666633, March.
    23. Alfons Oude Lansink & Spiro Stefanou, 2001. "Dynamic Area Allocation and Economies of Scale and Scope," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(3), pages 38-52.
    24. George E. Battese, 1997. "A Note On The Estimation Of Cobb-Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 250-252.
    25. Tsekouras, Kostas D. & Pantzios, Christos J. & Karagiannis, Giannis, 2004. "Malmquist productivity index estimation with zero-value variables: The case of Greek prefectural training councils," International Journal of Production Economics, Elsevier, vol. 89(1), pages 95-106, May.
    26. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea13:149248. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aaeaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.