Assessment of the Effects of Covid-19 Pandemic in the Analysis of Demand for Livestock Products Using Switching Regression Framework

Document Type : Research Article

Authors

• M. Rezvani ¹
• M. Pendar ²
• S.S. Hosseini ²
• H. Rafiee ²

¹ Department of Agricultural Economics, Faculty of Agriculture and Natural Resources, University of Tehran, Karaj, Irans

² Department of Agricultural Economics, Faculty of Agriculture and Natural Resources, University of Tehran, Karaj, Iran

https://doi.org/10.22067/jead.2025.90323.1303

Abstract

Introduction
The economy of countries are always exposed to shocks, including the Covid-19 pandemic, which causes many problems. The Covid-19 pandemic had various effects and consequences in different sectors, including the agricultural sector. The decline in income and production, coupled with the loss of customers due to health quarantines and border closures, severely impacted farmers businesses and created many problems for activists of various sectors of the agriculture. One of the most important effects of the Covid-19 pandemic is the decline in global economic growth. This has led to increased unemployment, decreased purchasing power among the population, and consequently, a decrease in demand. According to the impact of the covid-19 pandemic on food demand resulting from disruptions in the supply chain and income shocks, this research aims to investigate the existence of a structural break in the preferences of Iranian consumers for livestock products (red meat, chicken, eggs, and milk) using the Quadratic Almost Ideal Demand System (QAIDS) and the switching regression framework developed by Ohtani & Katayama (1986) during the period from Spring 2015 to Winter 2022.
 
Materials and Methods
Nonparametric and parametric approaches are utilized to investigate structural break in consumer preferences. This research employs parametric approaches and the Quadratic Almost Ideal Demand System to assess the structural break. The switching regression framework proposed by Ohtani and Katayama (1986) is utilized to model structural changes in preferences. In fact, a time transition function is incorporated into the demand system. Based on the characteristics of demand in the literature of structural changes, the Bewley likelihood-ratio test is applied to select an appropriate model. To evaluate the structural break and calculate the price and income elasticities, the price and per capita consumption data of livestock products are required, and in this research, seasonal time series data for the period of spring 2015 to winter 2022 have been used. The information related to the price of livestock products was obtained from the Joint Stock Company of the Support of Livestock Affairs. To obtain the per capita consumption, first, the information on the amount of production of red meat, chicken, milk, and egg are received from the joint stock company for livestock affairs. Then, by summing the amount of production and the amount of import of red meat, chicken, milk and eggs and deducting the amount of export from the said amount and dividing it by the population of the country, the amount of consumption per capita are calculated. The amount of export and import of red meat, chicken, milk and eggs is taken from the export and import report of the Ministry of Agriculture (Jihad), which is published monthly.
 
Results and Discussion
To estimate the system equations, one equation was removed, and the remaining equations were solved and estimated based on the removed equation. Accordingly, the equation related to milk was removed and the QAIDS with 33 parameters and three equations including those related to red meat, chicken and egg were estimated using the maximum likelihood estimator non-linearly. The results show the Based on the statistics of log-likelihood and DW the existence of a sudden structural break as a result of the Covid-19 pandemic. Comparing the Bewley likelihood-ratio test statistics calculated for an Non-Restricted QAIDS (with structural break) and a Restricted QAIDS (without structural break) with a critical χ^2 value with degrees of freedom of nine at the probability level of 5% indicates that the Non-Restricted QAIDS is selected as the appropriate functional form. Also, the results show that after the Covid-19 epidemic, the own price elasticity of red meat and chicken has increased significantly. Considering the high elasticity of the price of red meat, chicken and eggs after the Covid-19 epidemic, it is suggested that the government utilize price tools such as electronic coupon system to support consumers.
 
Conclusion
Due to the high cross-elasticity coefficients of demand for red meat, chicken and eggs after the Covid-19 pandemic, it can be expected that a change in the price of one of the red meat, chicken and egg products will significantly change the demand for the other product. Therefore, in case of a price increase in one of the products, it is suggested to consider special discounts for other products to support the consumers.

Keywords

• Change of preference
• Quadratic almost ideal demand system
• Structural break JEL Classification: Q11
• D1
• D12

Main Subjects

• Marketing and Trade of Agriculture Production

©2025 The author(s). This is an open access article distributed under Creative Commons Attribution 4.0 International License (CC BY 4.0)

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