Document Type : Research Article
Authors
Department of Agricultural Economics, Faculty of Economics and Agricultural Development, University of Tehran
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.
Key words: An Implicitly Directly Additive Demand System, Food, Income Elasticity, Iran
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