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Sachintha Mendis and Vardges Hovhannisyan

No 252797, 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama from Southern Agricultural Economics Association

Abstract: Food consumers in China have undergone significant changes in their food consumption patterns and have become more dependent on animal products for protein, while substituting fine grains for coarse grains. Considerable research effort has been devoted to this topic. A majority of these studies rely on the AIDS model, which has linear Engel and ignores unobserved consumer heterogeneity. We study food demand in China using the Exact Affine Stone Index (EASI) system. The EASI model not only shares all of the desirable properties of the AIDS model but also provides additional benefits. Specifically, it is not subject to the rank three limitation of Gorman (1981) and allows the Engel curves to take arbitrary shapes. Further, the EASI accounts for unobserved consumer heterogeneity. This is especially important in welfare studies conducted on consumer-level since much of the demand variation is left unexplained. Previous studies focus on changes in quantities, however we reveal that quality is also very important. Further, results confirm the prevalence of unobserved heterogeneity in consumer food preferences across provinces in China. By enhancing the findings of previous studies, this study elicits more realistic food preferences in China for agricultural policy, trade, and foreign direct investment decisions.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-cna and nep-tra
Date: 2017-01-18
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