Short-Run Demand Relationships In The U.S. Fats And Oils Complex
Fats and oils play a prominent role in U.S. dietary patterns. Recent concerns over the negative health consequences associated with fats and oils have led many to suspect structural change in demand conditions. We consider short run (monthly) demand relationships for edible fats and oils. In that monthly quantities of fats and oils are likely to be relatively fixed, we utilize an inverse AIDS specification. Our analysis consists of two components. In the first, we utilize a smooth transition function to model a switching inverse almost ideal demand system (IAIDS) that assesses short-run demand conditions for edible fats and oils in the U.S. Our results suggest that short-run demand conditions for fats and oils experienced a rather rapid structural shift in the early 1990s. Although this shift generally made price flexibilities more elastic, differences in flexibilities across regimes are modest in most cases. Our results suggest that decreases in marginal valuations for most fats and oils in response to consumption increases are rather small. Scale flexibilities are relatively close to -1, suggesting near homothetic preferences for fats and oils. An important distinction occurs for lard and tallow, which exhibit a very elastic scale response. This suggests that scale increases in the consumption of edible fats and oils will significantly decrease consumers' marginal valuation of these animal fats. A second segment of our analysis considers dynamic extensions to the IAIDS model that recognize habit effects. Although nested hypothesis testing supports the dynamic specification over the static IAIDS model, price and scale flexibilities are quite similar to the static case.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.agebb.missouri.edu/ncrext/ncr134/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- E. W. Goddard & S. Glance, 1989. "Demand for Fats and Oils in Canada, United States and Japan," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 37(3), pages 421-443, November.
- Tsurumi, Hiroki & Wago, Hajime & Ilmakunnas, Pekka, 1986. "Gradual switching multivariate regression models with stochastic cross-equational constraints and an application to the Klem translog production model," Journal of Econometrics, Elsevier, vol. 31(3), pages 235-253, April.
- Ray, Ranjan, 1984. "A dynamic generalisation of the almost ideal demand system," Economics Letters, Elsevier, vol. 14(2-3), pages 235-239.
- Eales, James S. & Unnevehr, Laurian J., 1991.
"The Inverse Almost Ideal Demand System,"
Staff Paper Series
232516, University of Alberta, Department of Resource Economics and Environmental Sociology.
- Moschini, GianCarlo & Meilke, Karl D., 1989.
"Modeling the Pattern of Structural Change in U.S. Meat Demand,"
Staff General Research Papers
11266, Iowa State University, Department of Economics.
- Giancarlo Moschini & Karl D. Meilke, 1989. "Modeling the Pattern of Structural Change in U.S. Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 253-261.
- Holt, Matthew T & Goodwin, Barry K, 1997. "Generalized Habit Formation in an Inverse Almost Ideal Demand System: An Application to Meat Expenditures in the U.S," Empirical Economics, Springer, vol. 22(2), pages 293-320.
- Hoanjae Park & Walter N. Thurman, 1999. "On Interpreting Inverse Demand Systems: A Primal Comparison of Scale Flexibilities and Income Elasticities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 950-958.
- Hicks, J. R., 1986. "A Revision of Demand Theory," OUP Catalogue, Oxford University Press, number 9780198285502, June.
When requesting a correction, please mention this item's handle: RePEc:ags:ncrtci:18942. 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)
If references are entirely missing, you can add them using this form.