In the literature, a variety of approaches have been used to calculate demand elasticities in almost ideal demand system (AIDS) models of demand. It is common to estimate the linear approximate almost ideal demand system (LA/AIDS) instead of the AIDS. When the LA/AIDS is estimated, all of the previously reported approaches to compute elasticities are theoretically incorrect. This paper presents correct formulas for LA/ AIDS elasticities and illustrates the potential errors from using incorrect computing The almost ideal demand system (AIDS) of Deaton and Muellbauer (1980a,b) has become popular in recent years (Anderson and Blundell; Blanciforti and Green 1983a,b; Blanciforti, Green, and King; Chalfant; Eales and Unnevehr; Fujii, Khaled, and Mak; Fulponi, Heien and Willett; Murray; Parsons; Ray). A variety of approaches to computing elasticities has been used, and some of the approaches may lead to significant errors. This paper clarifies the differences between alternative approaches to estimating demand elasticities in AIDS models.

/pdf/elasticities-in-aids-models-nafya6tb06.pdf

Elasticities in AIDS Models

Several studies have indicated that the recent shift from beef to poultry in consumption is not entirely caused by changes in rela­ tive prices or income (Braschler, Chavas, Dahlgran, Hudson and Vertin, Moschini and Meilke, Frank, Thurman). Most studies of structural change have focused on red meat consumption; only Thurman has looked closely at the poultry market, and no one has considered poultry products. Yet, the mix of chicken products marketed changed dramat­ ically during the last twenty years and should have influenced aggregate meat demand. The share of broiler slaughter marketed as whole birds declined from 74% in 1965 to 28% in 1985, while cut-up parts and processed chick­ en products increased from 26% to 72%. Whole birds are inferior goods, and cut-up parts and processed chicken are normal goods (Haidacher et al.). The shift in chicken prod­ uct mix away from whole birds should have increased the preference for total chicken. In this article two related questions are ad­ dressed. First, do consumers allocate expendi­ tures among meats by animal origin or by­ product type? Second, does disaggregation of meat into products in a meat demand model give insight into the causes of structural

/pdf/demand-for-beef-and-chicken-products-separability-and-1d1xodhut7.pdf

Demand for Beef and Chicken Products: Separability and Structural Change

Estimating Agricultural Supply Response with the Nerlove Model: A Survey

Location and Space Economy

U.S. per capita shell egg consumption has declined steadily since 1955 despite a falling real price. This paper investigates how information about cholesterol, as measured by a newly constructed index based on medical journal articles, has affected U.S. demand for shell eggs. The results of a fixed coefficient model indicate that information on the links between cholesterol and heart disease had decreased per capita shell egg consumption by 16% to 25% by the first quarter of 1987. A simple changing coefficient model indicates that cholesterol information has changed shell eggs' own price and income elasticities, so that the 1955–87 falling egg price and rising income increased egg consumption less than they otherwise would have.

Cholesterol Information and Shell Egg Consumption

m m GIANNINI 'F OUNDATION OF AGRICULTURAL ECONOMICS UNIVERSITY O F CALI FORMI A U.S. Consumer Behavior Over the Postwar Period: An Almost Ideal Demand System Analysis Laura A. Blanciforti, Richard D. Green, and Gordon A. King Department of Agricultural and Resource Economics University of California, Davis Giannini Foundation Monograph Number 40 • August 1986

/pdf/u-s-consumer-behavior-over-the-postwar-period-an-almost-8qxynug88w.pdf

U.S. Consumer Behavior over the Postwar Period: An Almost Ideal Demand System Analysis

Supply response for a perennial crop is influenced by the age composition of existing plant stocks which, in turn, is determined by historical patterns of plantings and removals. This paper develops estimates of functions that relate the planting and removal of cling peach trees to measures of past profitability, potential future production from existing acreage, and structural changes associated with market intervention programs. The analysis also provides indications of useful forms for these functions, patterns of yield variation by age of tree, and the nonlinear relation of removal response to age of tree.

Planting and Removal Relationships for Perennial Crops: An Application to Cling Peaches

INEAR programming methods for solution of point-trading spatial equilibrium models have provided an important tool for analysis of regional adjustments to changing economic conditions. Studies to date generally have been concerned with equilibrium product shipments and product prices. Increased flexibility in the possible types of analyses recently has been provided by a programming formulation of a general equilibrium model for both product and factor shipments and prices.2 This development has proved particularly helpful in the quantification of this model concerned with the location of beef cattle feeding facilities. Although the entire analysis is not completed, the method used appears to be of sufficient general applicability and interest to warrant presentation at this time of the preliminary findings and the approach employed. Feedlot finishing of beef cattle basically involves three major variable inputs: feeder cattle, feed concentrates, and hay or other roughages. These factors can be shipped among various regions of the country. Similarly, slaughter cattle or meat can be shipped to meet regional levels of demand for beef. The problem is to determine that regional organization of cattle feeding, factor and product shipments, and beef prices that would result from perfectly competitive behavior. This organization would provide a basis for appraising efficiency of the current location of feeding, and for determining probable direction of regional adjustments to changes in such factors as regional level of demand for feedlot finished beef. A spatial equilibrium analysis of this nature requires specification of three types of functional relationships; namely, demand functions, transfer functions for product and factors, and supply functions for the production of feedlot finished beef. In this study, the demand function is

Regional Location of Beef Cattle Feeding

The sharp and continued rise in food prices during 1973 and 1974 has directed attention to commodity analysis in particular and to economic forecasting in general. Heller's oft quoted comment that 1973 was a year of infamy in forecasting is hardly the attention one might desire. But if such attention leads to a reevaluation and improvement of econometric models, it will be worthwhile. I prefer to focus attention on such an evaluation rather than explain for one more time that weather can drastically affect production and prices, that a food grain reserve is an important aspect of agricultural food policy, that Russian wheat deals and lack of information can be disruptive to commodity markets, and that a continued search for an improved food and agricultural policy is a must. Dale Hatheway has provided us with an excellent discussion of "Food Prices and Inflation" covering these points. Also, Cromarty will focus on short-term forecasting in the following paper. The general thrust of this paper is that although agricultural economists have made important advances in supply and demand analysis in the past decade, we have not exposed these models to the same scrutiny on predictive performance as for macromodels of the economy. This may be for several reasons. First, there is considerable publicity given to predictions of GNP by various macromodels; second, the commodity "Outlook" reports of the Economic Research Service generally are not explicit as to the underlying model used; third, with some exceptions, the commodity models published by state experiment station researchers are not designed for the purpose of a continual update, prediction, and evaluation; and fourth, the export demand equations of commodity models are particularly difficult to quantify. Ongoing work in the Economic Research Service in long-term forecasting, trade, and commodity models perhaps will rectify some of these limitations, but it is my impression that a coordinated evaluation of the models is overdue. The symposium on econometric model performance reported in the 1974 International Economic Review certainly has no counterpart in the agricultural commodity model building fraternity. This should be done. Further, I suggest that we should move to develop the required data banks, the econometric models, the estimations and simulations of alternative outcomes on a continuing basis rather than what appears to be the present start-stop characteristic of much of our work.

Econometric Models of the Agricultural Sector

Volume control provisions of marketing orders have been among the most controversial aspects of the attempts at orderly marketing of agricultural commodities. Conflicts occur within and between producer bargaining groups and processors as to desired prices and tonnage. Consumer groups also are increasingly concerned with program provisions that appear to keep prices higher than would exist, at least in the short run, without such provisions. Such problems are particularly complex for perennial crops where long production cycles may occur. Policies or programs aimed at aiding short-run adjustments may have unexpected longer term consequences. This monograph reports the results of a quantitative analysis of the control provision of the California cling peach marketing order. The study focuses on the period 1956-1972, a period during which various market supply control measures were in effect. The analysis compares simulated time paths of the industry with and without the control provisions. Performance measures, such as farm and wholesale price levels, variability in prices, costs and returns, and quantities surplused, are used in this evaluation. The findings of this study emphasize the importance of conceiving a control program for a cyclical industry that recognizes the long-term impact of measures used to alleviate short-term excess production. Results of the simulated comparison of outcomes with and without controls suggest that the program increased average net returns to growers and reduced their variability. But in so doing, consumers' surplus was reduced by a greater amount than gains in economic rent to producers. However, such findings must be tempered by the consideration that the inherent cyclical behavior of this industry tends to result in wide fluctuations in prices and quantities. A situation of low producer prices was, in fact, the initial reason for the introduction of the quantity control provisions. It was concluded that market control programs, properly conceived and appropriately applied to deal w~th clearly understood adjustment needs, may offer some potential aggregate social benefits. But programs inappropriate for the problem and programs designed to maintain prices above competitive levels only serve to compound adjustment problems by giving wrong signals to producers. This appears to have been the case duriAg much of the past history in the cling peach industry.

An Econometric Analysis of Market Control in the California Cling Peach Industry

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