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Surmising Consumer Demand System & Structural Changes Using Time Series Data

Aziz, Babar and Malik, Shahnawaz (2006): Surmising Consumer Demand System & Structural Changes Using Time Series Data. Published in: Pakistan Economic and Social Review , Vol. XLIV, No. 1 (2006): pp. 117-136.

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Consumer demand for food and non-food items in Pakistan has attracted the attention of various researchers. They have employed different parametric approaches, like single equation, double log models, linear expenditure system and extended linear expenditure system. Most of the studies were based on household income and expenditure survey data. Like other household surveys, HIES data do not give information about prices, due to which price elasticities could not estimated. This task could not be accomplished partly because, in order to examine the existence and the nature of structural change and estimation of price elasticities, time series data was required. In this context the present study is a step ahead. In this analysis time series data has been used on meat group from 1950-51 to 2003-2004. We estimated the linear approximation of almost ideal demand system (LA/AIDS). The model is used to estimate the parameters of meat demand equations. Furthermore, the existence and the nature of the structural change is checked by using LA/AIDS. The results from LA/AIDS model show a shift in consumer demand in case of chicken in 1991-92. Price and expenditure elasticities have also been calculated. The estimates of price and income elasticities are also consistent with economic theory.

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