Investigation of generalized composite commodity theory and estimation of demand function of meat types for urban households in Iran

Document Type : Research Paper

Authors

• Mohammd Rezvani ¹
• Hamid Amirnejad ²
• Yadollah Bostan ³

¹ 1. Ph.D. Student, Department of Agricultural Economics, University of Tehran

² Professor, Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Mazandaran, Iran

³ Ph.D. Student, Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University

10.30495/jae.2024.30531.2345

Abstract

The aim of the present study was to investigate the possibility of aggregating and estimating the collective demand function for meat commodity groups (mutton, beef, poultry, canned fish, southern fish and northern fish) using Weak Separability methods, generalized composite commodity and the demand function of Iranian urban households. Necessary data and information were obtained from the annual statistics of expenses and income of Iranian households of the Statistics Organization for the period of 2005-2020. The results of income elasticity showed that two canned goods, fish and southern fish, are considered luxury for Iranian urban households. Northern fish with a self-price pull of -1.28 is most sensitive to price changes against other types of meat. Also, canned fish and southern fish are substituted based on the intersection of canned fish. According to the results of the Separability test for different types of meat, different types of meat can be divided into two groups of red and white meat.

Keywords

• Aggregation
• Differential Demand System
• GCCT
• GODDS
• Weak Separability

---

References

1. Asche F, Guttormsen AG, Kristofersson D, Roheim CA. Import demand estimation and the generalized composite commodity theorem. 2005; 24-27. [http://dx.doi.org/10.22004/ag.econ.19432]
2. Asche F, Guttormsen A, Tveterås S. Aggregation over different qualities: Are there generic commodities. Economics Bulletin. 2001; 3(13): 1-6. http://www.accessecon.com/pubs/eb/default.aspx?topic=Abstract&PaperID=EB-01C40005
3. Davis GC. Product aggregation bias as a specification error in demand systems. American Journal of Agricultural Economics. 1997; 79(1): 100-9. [https://doi.org/10.2307/1243946]
4. Davis GC, Lin N, Shumway CR. Aggregation without separability: Tests of the United States and Mexican agricultural production data. American Journal of Agricultural Economics. 2000; 82(1): 214-30. [https://doi.org/10.1111/0002-9092.00017]
5. Deaton A, Muellbauer J. An almost ideal demand system. The American economic review. 1980; 70(3): 312-26. https://www.jstor.org/stable/1805222
6. Deaton A, Muellbauer J. Economics and consumer behavior, university press, London. 1999. [https://doi.org/10.1017/CBO9780511805653]
7. Delavar A, Yavari G, Yazdani S, Amjadi A, Mahmoodi A. Weak Separability Testing and Estimation of Selected Food Commodities Demand System in Urban Households of Iran (Case of Citrus Fruits, Cucurbits and Vegetables). International Journal of Agricultural Management and Development. 2020; 10(3): 293-305. [https://dorl.net/dor/20.1001.1.21595852.2020.10.3.7.6]
8. Duan L, Ventura JA. A joint pricing, supplier selection, and inventory replenishment model using the logit demand function. Decision Sciences. 2021; 52(2): 512-34. [https://doi.org/10.1111/deci.12441]
9. Eales J, Wessells CR. Testing separability of Japanese demand for meat and fish within differential demand systems. Journal of Agricultural and Resource Economics. 1999; 114-26. [https://www.jstor.org/stable/40987011]
10. Eales JS, Unnevehr LJ. Demand for beef and chicken products: separability and structural change. American Journal of Agricultural Economics. 1988; 70(3): 521-32. [https://doi.org/10.2307/1241490]
11. Fatahi A, Sakhi F, Bostan Y, Rezvani M. Structural break in preferences of Iranian urban and rural milk consumers. Agricultural Economics and Development. 2021; 29(2): 87-108. (In Farsi) [https://dx.doi.org/10.30490/aead.2021.319195.1117]
12. Goldman SM, Uzawa H. A note on separability in demand analysis. Econometrica: Journal of the Econometric Society. 1964; 387-98. [https://doi.org/10.2307/1913043]
13. Gregory AW, Veall MR. Formulating Wald tests of nonlinear restrictions. Econometrica: Journal of the Econometric Society. 1985; 1465-8. [https://doi.org/10.2307/1913221]
14. Heng Y, House LA, Kim H. The competition of beverage products in current market: A composite demand analysis. Agricultural and Resource Economics Review. 2018; 47(1): 118-31. [https://doi.org/10.1017/age.2017.10]
15. Hicks J.R. Value and capital.2nd Edition, Oxford Univ.Press, London. 1946.
16. Jadidzadeh A, Serletis A. The demand for assets and optimal monetary aggregation. Journal of Money, Credit and Banking. 2019; 51(4): 929-52. [https://doi.org/10.1111/jmcb.12550]
17. Xie J, Myrland Ø. Consistent aggregation in fish demand: a study of French salmon demand. Marine Resource Economics. 2011; 26(4): 267-80. [https://doi.org/10.5950/0738-1360-26.4.267]
18. Leontief W. Composite Commodities and the Problem of Index Numbers. Econometrica. 1946; 4: 439-59. [https://doi.org/10.2307/1907120]
19. Leontief W. Introduction to a theory of the internal structure of functional relationships. Econometrica, Journal of the Econometric Society. 1947; 361-73. [https://doi.org/10.2307/1905335]
20. Lewbel A. Aggregation without separability: a generalized composite commodity theorem. The American Economic Review. 1996: 524-43. https://www.jstor.org/stable/2118210
21. Lucas Jr RE, Nicolini JP. On the stability of money demand. Journal of Monetary Economics. 2015; 73: 48-65. [https://doi.org/10.1016/j.jmoneco.2015.03.005]
22. Mattson RS, De Peretti P. Testing For Weak Separability Using Stochastic Semi-Nonparametric Tests: An Empirical Study On Us Data. Macroeconomic Dynamics. 2018; 22(6): 1510-34. [https://doi.org/10.1017/S1365100516000791]
23. Moschini G, Green RD. Separability in Demand Analysis: Untested Assumption or Tested Hypothesis?. 1991; 39-52. [http://dx.doi.org/10.22004/ag.econ.307840]
24. Moschini G, Moro D, Green RD. Maintaining and testing separability in demand systems. American Journal of Agricultural Economics. 1994; 76(1):61-73. [https://doi.org/10.2307/1243921]
25. Nayga Jr RM, Capps Jr O. Tests of weak separability in disaggregated meat products. American Journal of Agricultural Economics. 1994; 76(4): 800-8. [https://doi.org/10.2307/1243741]
26. Nicol CJ. The effect of expenditure aggregation on hypothesis tests in consumer demand systems. International Economic Review. 1991; 405-16. [https://doi.org/10.2307/2526883]
27. Reed AJ, Levedahl JW, Hallahan C. The generalized composite commodity theorem and food demand estimation. American Journal of Agricultural Economics. 2005; 87(1): 28-37. [https://doi.org/10.1111/j.0002-9092.2005.00699.x]
28. Rezvani M, Bostan Y, Etghaei M, Fatahi Ardakani A. Investigation of changes in bread consumers' preferences in urban areas of Iran using WARP and SARP approaches. Journal of Economic Modeling Research. 2020; 11(42): 187-214. (In Farsi) [http://dorl.net/dor/20.1001.1.22286454.1399.11.42.1.7]
29. Salami H, Kiani Rad A. The Application of Generalized Composite Commodity Theorem for Consistent Crop Products Aggregation in Iran. JWSS. 2002; 5 (4) :25-39. (In Farsi) [http://dorl.net/dor/20.1001.1.24763594.1380.5.4.3.9]
30. Schulz LL, Schroeder TC, Xia T. Using weak separability and Generalized Composite Commodity Theorem in modeling ground beef demand. The Agricultural and Applied Economics Association’s AAEA and NAREA Joint Annual Meeting, Pittsburgh, Pennsylvania, July. 2011; 24-26. [http://dx.doi.org/10.22004/ag.econ.103904]
31. Schulz LL, Schroeder TC, Xia T. Studying composite demand using scanner data: the case of ground beef in the US. Agricultural Economics. 2012; 43: 49-57. [https://doi.org/10.1111/j.1574-0862.2012.00619.x]
32. Shabanzadeh M, Mahmoodi A. Investigation the possibility of Aggregation fruits and nuts, vegetables, Beans and vegetable products: Using Generalized Composite Commodity Theorem (GCCT). Journal Of Agricultural Economics and Development. 2015; 29(4): 345-358. (In Farsi) [https://dx.doi.org/10.22067/jead2.v29i4.43205]
33. Shokoohi M, Salami H. Testing aggregation of protein food products in urban areas of Iran: A comparison of different Generalized Composite Commodity tests. Agricultural Economics. 2016; 10(1): 37-55. (In Farsi)
    [https://dx.doi.org/10.22034/iaes.2016.14194]
34. Sono M.. The effect of price changes on the demand and supply of separable goods. Intern. Economic Review. 1961; 2: 239-271. [https://doi.org/10.2307/2525430]
35. Statistical Centre of Iran. Expenditure and income of Iranian households. 2021; (In Farsi) https://www.amar.org.ir/
36. Wohlgenant MK. Consumer Demand—Separability and Commodity Aggregation. In Market Interrelationships and Applied Demand Analysis. Palgrave Macmillan, Cham. 2021; 21-36. [https://doi.org/10.1007/978-3-030-73144-1_3]