Demand Estimation and Household’s Welfare Measurement: Case Studies on Japan and Indonesia

Widodo, Tri (2006): Demand Estimation and Household’s Welfare Measurement: Case Studies on Japan and Indonesia. Published in: HUE Journal of Economics and Business , Vol. 29, No. 2.3 (30 December 2006): pp. 103-136.

Abstract

This paper aims to estimate households’ demand function and welfare measurement under Linear Expenditure System (LES) in the case of Japan and Indonesia. In estimating the coefficients of the LES, this paper applies Seemingly Uncorrelated Regression (SUR) method. This paper gives some conclusions. First, for food consumption Indonesian households have the maximum marginal budget share on Meat and the minimum one on Fruits; meanwhile Japanese households have the maximum marginal budget share on Fish and shellfish and the minimum one on Dairy products and eggs. Indonesian households are ‘meat lover’ and Japanese households are ‘fish lover’. Second, Indonesian households have smaller gap between minimum food consumption (subsistence level) and average food consumption than Japanese households have. Third, with the same level of price increase on foods the simulation shows that in nominal-term (Yen, ¥) Japanese households get greater welfare decrease than Indonesian households get. However, in the percentage of total food expenditure, Indonesian households get greater welfare decrease than Japanese households get. Fourth, it is estimated that during the period 2000-2004 the changes of prices in living expenditure increased both Japanese All Households and Japanese Worker Households more than ¥ 4,500.

• Item Type: MPRA Paper
• Language: English
• Keywords: Linear Expenditure System (LES), Seemingly Uncorrelated Regression (SUR), Compensating Variation (CV), Equivalent Variation (EV).
• Subjects: I - Health, Education, and Welfare > I0 - General; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty

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