Income and price elasticities of animal food demand and welfare in Indonesian urban: an application of the LA-AIDS
Keywords:
demand system, price change, welfare, CV, EVAbstract
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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Vu, L., & Glewwe, P. (2011). Impacts of rising food prices on poverty and welfare in Vietnam. Journal of Agricultural and Resource Economics, 14–27.
Zhang, D., Feng, Y., Li, N., & Sun, X. (2020). Fruit and vegetable consumptions in relation to frequent mental distress in breast cancer survivors. Supportive Care in Cancer, 1–9.
Alem, Y. (2011). The impact of food price inflation on consumer welfare in urban Ethiopia: A quadratic almost ideal demand system approach. Economic Studies Department of Economics School of Business, Economics and Law University of Gothenburg, 54.
Alnafissa, M., & Alderiny, M. (2019). Analysis of Saudi demand for imported honey using an Almost Ideal Demand System (AIDS). Journal of the Saudi Society of Agricultural Sciences.
Araar, A., & Verme, P. (2016). Prices and welfare. The World Bank.
Bairagi, S., Mohanty, S., Baruah, S., & Thi, H. T. (2020). Changing food consumption patterns in rural and urban Vietnam: Implications for a future food supply system. Australian Journal of Agricultural and Resource Economics.
Bellemare, M. F., Barrett, C. B., & Just, D. R. (2013). The welfare impacts of commodity price volatility: Evidence from rural Ethiopia. American Journal of Agricultural Economics, 95(4), 877–899.
Béné, C., Barange, M., Subasinghe, R., Pinstrup-Andersen, P., Merino, G., Hemre, G.-I., & Williams, M. (2015). Feeding 9 billion by 2050–Putting fish back on the menu. Food Security, 7(2), 261–274.
Beznoska, M. (2019). Do couples pool their income? Evidence from demand system estimation for Germany. Diskussionsbeiträge.
Bronnmann, J., Guettler, S., & Loy, J.-P. (2019). Efficiency of correction for sample selection in QUAIDS models: An example for the fish demand in Germany. Empirical Economics, 57(4), 1469–1493.
Coelho, A. B., & Aguiar, D. de. (2007). O modelo quadratic almost ideal demand system (quaids): Uma aplicação para o brasil. Gasto e Consumo Das Famílias Brasileiras Contemporâneas, 2, 485–514.
Deaton, A., & Muellbauer, J. (1980a). An almost ideal demand system. The American Economic Review, 70(3), 312–326.
Deaton, A., & Muellbauer, J. (1980b). Economics and consumer behavior. Cambridge university press.
Dong, D., Kaiser, H. M., & Myrland, O. (2003). Estimation of Censored LA/AIDS Model with endogenous unit values.
Elijah Obayelu, A., Okoruwa, V. O., & Ajani, O. I. Y. (2009). Cross-sectional analysis of food demand in the North Central, Nigeria: The quadratic almost ideal demand system (QUAIDS) approach. China Agricultural Economic Review, 1(2), 173–193.
Friedman, J., & Levinsohn, J. (2002). The distributional impacts of Indonesia’s financial crisis on household welfare: A “rapid response” methodology. The World Bank Economic Review, 16(3), 397–423.
Gouel, C., & Guimbard, H. (2019). Nutrition transition and the structure of global food demand. American Journal of Agricultural Economics, 101(2), 383–403.
Hal R. Varian. (2010). Intermediate Microeconomics A Modern Approach Eight Edition. W.W. Norton & Company.
Headey, D. D., & Martin, W. J. (2016). The impact of food prices on poverty and food security. Annual Review of Resource Economics, 8, 329–351.
Hoddinott, J., Alderman, H., Behrman, J. R., Haddad, L., & Horton, S. (2013). The economic rationale for investing in stunting reduction. Maternal & Child Nutrition, 9, 69–82.
Horne, J., Recker, M., Michelfelder, I., Jay, J., & Kratzer, J. (2020). Exploring entrepreneurship related to the sustainable development goals-mapping new venture activities with semi-automated content analysis. Journal of Cleaner Production, 242, 118052.
Huffman, S. K., & Johnson, S. R. (2002). Re-evaluation of Welfare Changes during the Transition in Poland. Post-Communist Economies, 14(1), 31–46.
Jain, M. (2018). Large decrease in child stunting despite limited improvement in children’s food intake: Evidence from rural Bangladesh. Economic Development and Cultural Change, 66(3), 555–583.
Jansen, W. J. (2000). International capital mobility: Evidence from panel data. Journal of International Money and Finance, 19(4), 507–511.
Kharisma, B., Alisjahbana, A. S., Remi, S. S., & Praditya, P. (2020). Application of the Quadratic Almost Ideal Demand System (QUAIDS) Model in the Demand of the Household Animal Sourced Food in West Java. Agris On-Line Papers in Economics and Informatics, 1(March), 23–35.
Khoiriyah, N., Anindita, R., Hanani, N., & Muhaimin, A. W. (n.d.). Animal Food Demand in Indonesia: A Quadratic Almost Ideal Demand System Approach. Agris On-Line Papers in Economics and Informatics, 2(June), 85–97.
Khonje, M. G., Ecker, O., & Qaim, M. (2020). Effects of Modern Food Retailers on Adult and Child Diets and Nutrition. Nutrients, 12(6), 1714.
Mahmudiono, T., Nindya, T. S., Andrias, D. R., Megatsari, H., & Rosenkranz, R. R. (2016). The effectiveness of nutrition education for overweight/obese mothers with stunted children (NEO-MOM) in reducing the double burden of malnutrition in Indonesia: Study protocol for a randomized controlled trial. BMC Public Health, 16(1), 486.
McCarthy, J. F. (2020). The paradox of progressing sideways: Food poverty and livelihood change in the rice lands of outer island Indonesia. The Journal of Peasant Studies, 47(5), 1077–1097.
Naidoo, R., & Fisher, B. (2020). Reset sustainable development goals for a pandemic world. Nature Publishing Group.
Nendissa, D. R., Anindita, R., Hanani, N., Muhaimin, A. W., & Henuk, Y. L. (2019). Concentration of beef market in East Nusa Tenggara (ENT) Province, Indonesia. IOP Conference Series: Earth and Environmental Science, 260(1), 012023.
Nikmatul, K., Ratya, A., Nuhfil, H., & Wahib, M. A. (2020). The analysis demand for animal source food in Indonesia: Using Quadratic Almost Ideal Demand System. Business: Theory and Practice, 21(1), 427–439.
Pereda, P. C. (2008). Estimação das equações de demanda por nutrientes usando o modelo Quadratic Almost Ideal Demand System (QUAIDS). Universidade de São Paulo.
Robert, K. W., Parris, T. M., & Leiserowitz, A. A. (2005). What is sustainable development? Goals, indicators, values, and practice. Environment: Science and Policy for Sustainable Development, 47(3), 8–21.
Sa'diyah, A. A., Khoiriyah, N., Anindita, R., Hanani, N., & Muhaimin, A. W. (2019). Strategic food price change and its welfare impact on poor households in Indonesia. The 3rd International Conference on Green Agro-Industry and Bioeconomy, 26 August 2019, Malang - Indonesia.
Sari, P. N., NUGROHO, A. D., Prasada, I., SIREGAR, A. P., & Saputra, W. A. (2017). Buku Prosiding Seminar Nasional Hasil Penelitian Sosial Ekonomi Pertanian" Keberlanjutan Agribisnis Indonesia di Era Globalisasi: Liberalisasi atau Proteksi".
Umaroh, R., & Pangaribowo, E. H. (n.d.). WELFARE IMPACT OF HIGH-NUTRIENT FOOD PRICE INCREASE ON INDONESIAN HOUSEHOLDS: IS THERE ROLE FROM OWN-FARM PRODUCTION? Journal of Indonesian Economy and Business, 35(1).
Vu, L., & Glewwe, P. (2011). Impacts of rising food prices on poverty and welfare in Vietnam. Journal of Agricultural and Resource Economics, 14–27.
Zhang, D., Feng, Y., Li, N., & Sun, X. (2020). Fruit and vegetable consumptions in relation to frequent mental distress in breast cancer survivors. Supportive Care in Cancer, 1–9.
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Published
2022-12-30
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Sa’diyah, A. A. (2022). Income and price elasticities of animal food demand and welfare in Indonesian urban: an application of the LA-AIDS. Future of Food: Journal on Food, Agriculture and Society, 11(1). Retrieved from https://thefutureoffoodjournal.com/manuscript/index.php/FOFJ/article/view/491
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