A Full Bayesian Analysis of Structural Changes with the AIDS Model: The Case of Meat Demand

This study applies to a Bayesian methodology to the oft-examined issue of whether a structural change has occurred in U.S. meat demand. The Bayesian approach allows us several advantages over earlier studies. First, we can estimate the true AIDS model instead of the commonly substituted linear-approximate version. Second, we derive the marginal posterior distribution of the time period in which the structural change occurred. This provides greater insight into whether the data is sharply or mildly informative as to such a structural change. Finally, we can derive posterior density results for the changes in parameters and elasticities across the two regimes. The results show the data to be highly informative with respect to a structural change in meat demand in the fourth quarter of 1975, but less evidence is found for changes in the majority of individual model parameters.