Income and price elasticities of animal food demand and welfare in Indonesian urban: an application of the LA-AIDS
Protein consumption can be a measure of the welfare of society. Developed countries consume more protein than developing countries. This study analyzes the effect of rising prices and income on demand and welfare in urban Indonesia. The research data use the 2018 Household National Socio-Economic Survey (Susenas) data in household consumption and expenditure data collected by the Central Statistics Agency (BPS). The number of samples is 133,873 households. The demand systems approach uses the Almost Ideal Demand System (LA-AIDS). The welfare change approach uses Compensating Variation (CV) and Equivalent Variation (EV). The results showed that the meat group was the most elastic animal food with a demand elasticity of 13,936%, followed by milk (0.991%), sea fish (0.649%), eggs (0.284%), and chicken meat (0.057%). Beef is a substitute for sea fish and eggs. Beef with chicken and milk is complementary. All animal food is a luxury item except sea fish, which is a normal item. In the long term, the highest marginal expenditure share is marine fish at 0.592%, followed by milk (0.123%), beef (0.102%), eggs (0.078%), and the lowest is chicken meat at 0.012%. Taking into account the substitution, the price increase simultaneously requires CV compensation of Rp. 244,830/HH/month, EV of Rp.231,858/HH/month. Especially for the animal food group, the biggest compensation for eggs needs CV compensation of Rp. 10,083/HH/month, and EV of Rp. 9,493/HH/month. In general, EV compensation is more effective than CV compensation.
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