Work detail

Household food demand in the Czech Republic: coherent demand system dealing with selectivity

Author: Mgr. Šarlota Smutná, M.Sc.
Year: 2016 - summer
Leaders: Mgr. Milan Ščasný PhD.
Work type: Economic Theory
Language: English
Pages: 83
Awards and prizes:
Abstract: Demand for food is widely studied topic in applied econometrics. Demand systems are the most useful
models to evaluate demand and estimate the income and price elasticities. Different demand systems
used for food demand are discussed in this thesis. Almost Ideal Demand System (AIDS) is the most
popular among researchers thanks to conformity with economic theory, simple estimation, and
flexibility with respect to non-linearity of Engel's curves or to control for socio-demographic or
structural variables of household. Reporting of zero consumption by respondents when analysing
demand on budget survey data requires special treatment, as censoring leads to the selectivity problem
and hence biased estimates. Several techniques to treat the selectivity in order to obtain unbiased
estimate of demand elasticities are discussed. Specifically, the Heien and Wessels, Shonkwiler and Yen,
and Cosslett's semi-parametric corrections are incorporated into the AIDS model and empirically
compared among each other. Since homogeneity and symmetry conditions are not fulfilled in this case,
income and price elasticities of food demand are estimated by the unrestricted version of QUAIDS
model which suits the budget survey data of Czech households the best with the correction for the
selectivity by Shonkwiler and Yen's estimator. The estimated income elasticities of demand for all food
and non-alcoholic beverages categories are higher than unity. The own-price elasticities are for all
categories negative and vary across them.




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