Application of the Implicitly Directly Additive Demand System (AIDADS) in Modeling Consumption Behavior of the Iranian Households for Selected Food Commodities

Salami, H.; Shahbazi, H.

doi:10.22067/jead2.v1388i1.2074

Application of the Implicitly Directly Additive Demand System (AIDADS) in Modeling Consumption Behavior of the Iranian Households for Selected Food Commodities

Document Type : Research Article

Authors

H. Salami

H. Shahbazi

Department of Agricultural Economics, Faculty of Economics and Agricultural Development, University of Tehran

https://doi.org/10.22067/jead2.v1388i1.2074

Abstract

Abstract
In this study the AIDADS which is a generalization of Linear Expenditure System (LES) and in contrast to the latter model allows the presence of nonlinear relationship between demand and consumption expenditure is applied to the Iranian consumption data on beef, lamb, broiler, fish, milk, apple and orange for period 1976-2006. Results indicate that, income elasticity, derived from both restricted and unrestricted models, has a nonlinear relationship with per capita income (expenditure). Thus, LES which is widely used in empirical studies may results in an unrealistic elasticities and inappropriate policy implication. Results based on the estimated AIDADS reveal that income elasticity for beef and lamb are less than one, for apple is equal one, and for milk, fish and chicken are more than one. Therefore, the latter group of commodities is considered to luxury, while that of the first group is necessary.

Keywords

An Implicitly Directly Additive Demand System

Food

Income Elasticity

Iran