Nutrient elasticities in meat demand: a case in Malaysia

Transcription

1 MPRA Munch Personal RePEc Archve Nutrent elastctes n meat demand: a case n Malaysa (John) Yeong-Sheng Tey and Mad Nasr Shamsudn and Zanalabdn Mohamed and Amn Mahr Abdullah and Alas Radam Insttute of Agrcultural and Food Polcy Studes, Unverst Putra Malaysa, Malaysa., Faculty of Envronmental Studes, Unverst Putra Malaysa, Malaysa., Department of Agrbusness and Informaton System, Faculty of Agruculture, Unverst Putra Malaysa, Malaysa., Insttute of Agrcultural and Food Polcy Studes, Unverst Putra Malaysa, Malaysa., Insttute of Agrcultural and Food Polcy Studes, Unverst Putra Malaysa, Malaysa. 27. December 2008 Onlne at MPRA Paper No , posted 8. Aprl :15 UTC

2 NUTRIENT ELASTICITIES IN MEAT DEMAND: A CASE IN MALAYSIA by Tey (John) Yeong-Sheng* 1, Mad Nasr Shamsudn 2, Zanalabdn Mohamed 3, Amn Mahr Abdullah 1, and Alas Radam 1 ABSTRACT One dstnct change n Malaysan food consumpton behavor s the preference for meat products over staple and gran foods ntact wth ncome growth. Havng mentoned the changes n food consumpton behavors, ndeed, there are changes n nutrent avalablty and ntae as well. Ths study ams to provde a better understandng of meat consumpton behavors n terms of ncome, prce, and nutrent elastctes by analyzng the Household Expendture Survey 2004/05 data. In the frst stage, expendture and ownprce elastctes are estmated va the LA/AIDS model. Ths s followed by an estmaton of Engel functon n the second stage to obtan the estmates of ncome elastctes for the meat products. Ths study shows that the major meat products (beef, por, mutton, and poultry) are normal goods and own-prce elastc. There are mxed messages obtaned from the estmated nutrent elastctes. Keywords: Meat, prce elastcty, ncome elastcty, nutrent elastcty JEL code: Q11, I INTRODUCTION One dstnct change n Malaysan food consumpton behavor s the preference for meat products over staple and gran foods ntact wth ncome growth. Snce there s a lmt on total calore ntae, Chern et al. (2003) suggested that the rato of the meat products n food baset becomes larger n comparson to other gran commodtes. Hence, meat consumpton s ncreasngly mportant n Malaysan det. Ths s manly attrbuted to the affordablty and homogenety of poultry to all ethncs n Malaysa. Generally, poultry sector s ndustralzed for mass producton n order to cope wth the pressure of tght maretng margn that caused by the mplementaton of celng prce. The recent prces (both ol and gran) he has forced the government to remove the celng prcng n poultry retal prce. 1 Insttute of Agrcultural and Food Polcy Studes, Unverst Putra Malaysa, Malaysa. * Correspondng author: tyeong.sheng@gmal.com 2 Faculty of Envronmental Studes, Unverst Putra Malaysa, Malaysa. 3 Department of Agrbusness and Informaton System, Faculty of Agruculture, Unverst Putra Malaysa, Malaysa.

3 The paragraph above s a bref descrpton to show that the entre agr-food ndustry s mpacted by changes n food consumpton behavors and vce-versa. Havng mentoned the changes n food consumpton behavors, ndeed, there are changes n nutrent avalablty and ntae as well. By dentfyng the mportance of meat n the det, t s crucal to relate t to consumpton behavor whch s the ey ndcator for demand forecasts, n terms of quantty, prce, and nutrent. To be more specfc, ths study attempts to provde a better understandng of meat consumpton behavors, by estmatng ncome, prce, and nutrent elastctes n Malaysa. These meat products comprse of beef, por, poultry, mutton, and other meats. It s mportant to tae note that fsh s not ncluded n ths demand analyss. Ths s because there are many heterogeneous groups n fsh. 2.0 MEAT CONSUMPTION AND NUTRIENTS Fgure 1 presents annual per capta meat consumpton n Malaysa, There are two man characterstcs of meat consumpton n Malaysa over the last four decades. The frst characterstc s descrbed by the ncreasng trend of total meat consumpton, whch recorded a steady growth from logram n 1960 to logram n A brea down sees a tremendous growth n poultry consumpton at an average of 5.2 percent annually, recorded from 3.8 logram to logram wthn the perod of Second characterstc s the splt of whte and red meat products n the composton of total meat consumpton. Obvously, the total meat consumpton s composed mostly by whte meat products. Its composton was as much as percent n 1960 and ht ts pea at percent n 1983 before decreased gradually to percent n The decrease n the latter years s attrbuted to a stylsh ncrease (about percent) n beef consumpton wthn the observaton perod. If the postve trend contnues, beef consumpton can be expected to overtae por consumpton n future.

4 FIGURE 1: Annual per capta consumpton of meat n Malaysa, g/person Year Source: Department of Veternary Servces, Beef Chcen Mutton Por Fgure 2 llustrates annual per capta total nutrent ntae from the total meat consumpton from 1960 to Computatons of nutrtve values are done by multplyng per capta consumpton of ndvdual meat wth nutrtve values n the meat, wth assumpton that there s no nutrtonal change n the content of meat products over the years. The nutrtve contents nclude proten (%), fat (gm), calores (cal), and cholesterol (mg) for beef, por, mutton, and poultry respectvely, as provded by Department of Veternary Servces (2008). Then, the computed nutrtve values for beef, por, mutton, and poultry are aggregated to yeld the annual per capta total nutrent ntae from the total meat consumpton from 1960 to The fgure llustrates changes n proten (%), fat (gm), calores (cal), and cholesterol (mg) n total meat consumpton clearly. Noor (2002) suggested that the changes are caused by economc growth whch s assocated wth lfestyle change. The sedentary lfestyle s further flooded wth rapd growth of meat based fast food ndustry. That explans none other but the popularty of meat consumpton n the country. Hence, the role of rce as man calore source has dmnshed whle calore sourced from meat has hed from 241 cal n 1960 to 1025 cal n Perhaps the man ntenton of meat consumpton s for proten ntae, however, the consumpton s always coupled wth hgher cholesterol. All these changes brought about an nevtable prevalence of health dseases n the populaton.

5 FIGURE 2: Annual nutrent ntae from total meat consumpton n Malaysa, Nutrent Year Proten (%) Fat (gm) Calores (Kcal) Cholesterol (Mg) Source: Computed from nutrtve values provded by Department of Veternary Servces (2008) 3.0 DATA Ths study nvolves two-stage estmaton of demand elastctes. The frst stage utlzes cross-sectonal data to derve ncome and prce elastctes. Ths study uses data collected from 14,084 respondents n the Household Expendture Survey 2004/05. Such large number of respondents provdes hgher degrees of freedom n econometrc estmaton than tme-seres data, as suggested by Chern et al. (2003) that the crosssectonal data can produce more plausble and relable estmates of demand elastctes than tme-seres data. In the data, zero consumpton happens when households dd not purchase any meat product wthn the survey perod. Table 1 presents the percentage of respondents wth zero consumpton. On average, zero consumpton s found to be the hghest n other meats (98.55%), whch are formed by many exotc meat products (eg: turtle, deer, etc). Ths s followed by mutton (97.37%), por (82.19%), beef (63.26%), and poultry (24.23%).

6 Table 1. Percentage of respondents wth zero consumpton, 2004/2005 Meat Percentage (%) Beef Por Mutton Poultry Other meats Source: Household Expendture Survey 2004/2005, Malaysa Table 2 presents the nutrtve value of meat per logram. It s useful n the second stage that ncorporates a matrx of the derved demand elastctes wth nutrtve values n each ndvdual meat product from secondary data that obtaned from Department of Veternary Servces (2008) to yeld nutrent demand elastctes. Table 2. Nutrtve value of meat per logram Beef Por Lamb Chcen Other meats 4 Proten (%) Fat (gm) Calores (Kcal) Iron (Mg) Cholesterol (Mg) Source: Department of Veternary Servces (2008) 4.0 MODEL SPECIFICATION As the zero consumpton rates are consderably hgh n the data, the estmaton procedures are deemed necessary to correct the possble bas created by the presence of zero consumpton n the meat products. In order to do so, two-step estmator developed by Heen and Wessells (1990) s utlzed to obtan the nverse Mlls ratos (IMRs) va probt model. The IMRs are then ncorporated nto Lnear Approxmate Almost Ideal Demand System (LA/AIDS) model. The LA/AIDS model for the 5 meat products can be expressed as follows: w L j p j ) log( x / P H mr log( ) (1) j where, j = 1, 2,., 5 meat products, w s the budget share of the th meat product, p s the prce of the th meat product, x s the aggregate total expendture of meat, H ncludes household sze and dummy varable of urban, s are random dsturbances L assumed wth zero mean and constant varance, and P s Laspeyres prce ndex for the aggregate food that can be defned by: 4 Nutrtve values n other meats are averages of nutrtve values of ostrch, turey, qual, deer, venson, grog legs, rabbt, and turtle.

7 log( P ) w log( P ) (2) The addng up, homogenety and symmetry restrctons are mposed for the LA/AIDS models. The addng-up restrcton s satsfed wth gven w 1 for all j: 1, j 0, 0, and 0 (3) 0 The homogenety restrcton s satsfed for the LA/AIDS model n and only f, for all j: (4) j 0 The symmetry s satsfed by: (5) j j Dervaton of demand elastctes By usng the procedures of Green and Alston (1990), the demand elastctes of the LA/AIDS models can be computed at sample means. The expendture elastctes can be estmated by: e w 1 (6) The Marshallan measures of prce elastctes can be computed by: s j w 1 w j j w j, j 1..., n (7) where j s the Kronecer delta that s unty f = j and zero otherwse. Snce the LA/AIDS model does not provde a drect estmate of ncome elastcty, Chern et al. (2003) and Chern (2000) suggested that an estmaton of Engel functon s useful to derve ncome elastcty from expendture elastcty. The Engel functon can be expressed as: L log x 0 1 log X log P H (8) where x s total expendtures of the meat products, X s total expendtures of food and L non-food consumer goods and servces, P s Laspeyres prce ndex for the aggregate food, and s random dsturbances assumed wth zero mean and constant varance.

8 The responsveness of expendture on food tems by ncome change can be derved by,. e e x X (10) X x Hence, ncome elastcty can be estmated as follows: e e * e (11) y e Measurng nutrent elastctes The second stage s to yeld nutrent elastctes by applyng the technque used by Anleye and Rahj (2007), Huang and Ln (2000), and Huang (1996). In smple term, nutrent elastcty matrx, say N, for the case of l nutrents and n foods can be obtaned as a product of multplyng matrx S by matrx D as follows: N = S* D (12) where N s the l x (n+1) matrx of nutrent elastctes n response to changes of food prces and ncome, S s the l x n matrx wth entres of each row ndcatng a food s share of a partcular nutrent, and D s the n x (n + 1) matrx of demand elastctes. 5.0 RESULTS Demand elastctes, namely own-prce and expendture elastctes that derved from the Malaysan meat demand system usng the LA/AIDS are presented n Table 3. All the negatve sgn of own-prce elastctes conform to the law of demand arsng from mcroeconomc theory. It s obvous that the own-prce elastctes are elastc, rangng from to For nstance, 10 percent ncrease n the prce of poultry wll result n percent decrease n demand for poultry, havng other thngs remaned constant. The mpact of ts prce change on demand s not as much as beef ( ), mutton ( ), por ( ), and other meats ( ). In other words, ths estmate suggests the ndspensble preference of poultry compared to other meat products, gven that t s the only most affordable and consumable meat product by all ethncs n Malaysa. On another hand, the dervaton obtaned more than unty expendture elastctes for varous meat products (except beef). As ncome ncreases, Malaysan consumers are lely to ncrease ther expendture on these foods faster that the ncome growth. If ncome ncreases 10 percent, Malaysan consumers are lely to ncrease ther expendture on mutton by percent. However, the expendture does not provde nformaton on quantty ntae, whch relates to nutrton ntae n another perspectve. Hence t s needed to obtan the estmates of ncome elastcty n ths study.

9 Table 3. Estmated demand elastctes of meat, Malaysa, 2004/2005 Prce elastcty Expendture Beef Por Mutton Poultry Other meats elastcty Beef Por Mutton Poultry Other meats Note: Hghlghted values are own-prce elastctes. By worng on extra Engel functon, ncome elastctes that yelded from the prevous expendture elastctes are presented n Table 4. It s obvous that the value of elastctes has decreased to less than unty (except other meats). The less than unty ncome elastctes mply that beef, por, mutton, and poultry are normal goods to Malaysan consumers. It means that when ncome ncreases, demand for quantty of each ndvdual meat products ncreases as well when other thngs reman constant. It s led by por (0.6487) and followed by mutton (0.4975), poultry (0.4841), and beef (0.3179). In contrast, the negatve sgn of other meats ndcate that these exotc meats are nferor goods, whch wll result aganst the drecton of normal goods n vew of ncome growth. Table 4. Estmated ncome elastctes of meat, Malaysa, 2004/2005 Meat Income elastcty Beef Por Mutton Poultry Other meats The ncome elastctes mentoned above that sgnfes how change n ncome wll affect demand for meat quantty are ndcators of lelhood. An algnment n the format of ndcaton by usng matrx technque between ncome and prce elastctes and nutrtve values of the meat products yelded nutrent elastctes from meat demand. The yelded nutrent elastctes are presented n Table 5. The second column shows the negatve relatonshp between ncome and aggregated nutrent ntae n meat demand. For example, 10 percent ncome growth wll have aggregated fat ntae decreased by percent. As meat products are hghly related to over-consumpton of fat, saturated fat, cholesterol rather than under-consumpton of other nutrents, such estmates suggest that Malaysan consumers are ncreasngly concerned of the nutrtonal contents n ther meat ntae, by holdng other thngs constant. Perhaps that explans why there s demand for trmmed/lean meat. The other columns n the table show the effects on the nutrents n response to changes n meat prces. It s very clear that there s postve prce mpact on all the meat products (except other meats). A 10 percent ncrease n the prce of beef wll ncrease

10 proten (%) ntae by percent when other thngs reman unchanged. However, the unwanted nutrents also come n a pacage wth meat ntae. A further loo sees that 10 percent ncrease n the prce of beef wll have fat (gm), calores (cal), and cholesterol (mg) ncreased more sgnfcantly than proten (%) ntae. Ths s appled to por, mutton, and poultry as well. A deeper thought can relate these ndcators (elastctes) to actual maret scenaro. One, the fallacy of meat prces whch do not mply the actual nutrent contents. Two, unlawfulness of meat producers who do not provde consumers wth actual nutrent contents. By puttng both concerns together, t sgnals a need for polcy maers to see possble mposton of labelng and traceablty on meat products. Table 5. Estmated nutrent elastctes of meat, Malaysa, 2004/2005 Nutrents Income Prce Beef Por Mutton Poultry Other meats Proten (%) Fat (gm) Calores (Kcal) Iron (Mg) Cholesterol (Mg) CONCLUSIONS Ths study ams to provde a better understandng of meat consumpton behavors n terms of ncome, prce, and nutrent elastctes by analyzng the Household Expendture Survey 2004/05 data. In the frst stage, expendture and own-prce elastctes are estmated va the LA/AIDS model. Ths s followed by an estmaton of Engel functon n the second stage to obtan the estmates of ncome elastctes for the meat products. Ths study shows that the major meat products (beef, por, mutton, and poultry) are normal goods and own-prce elastc. There are mxed messages obtaned from the estmated nutrent elastctes. As per capta ncome ncreases, Malaysan consumers are ncreasngly health conscous of ther meat ntae. However, they could be msled by the common prce-qualty fallacy whch s attrbuted to the lac of nutrent nformaton made avalable to them. Authortes are needed to step n to renforce the needy. Else, an open maret to nvte nternatonally recognzed meat producers who meets the nternatonal requrements (eg: as defned by Unted States Department of Agrculture) can lead to a maret force that pushes current maret to be safety- and qualty-orented. REFERENCES Anleye SO and Rahj M (2007). Nutrent Elastctes among Ngeran Households Dfferentated by Income, Ageon, 46(2):

11 Chern WS (2000). Assessment of Demand-Sde Factors Affectng Global Food Securty. Chapter 6, n Chern WS, Carter CA and She SY, eds. Food Securty n Asa: Economcs and Polces. Cheltenham, UK: Edward Elgar Publshng Lmted. Chern WS, Ishbash K, Tanguch K and Yooyama Y (2003). Analyss of Food Consumpton Behavor by Japanese Households. Food and Agrcultural Organzaton; Economc and Socal Development, Paper 152. Deaton A and Muellbauer J (1980). An Almost Ideal Demand System, Amercan Economcs Revew, 70: Department of Veternary Servces. (2008). Lvestoc Statstcs. Malaysa. Green R and Alston JM (1990). Elastctes n AIDS Models, Amercan Journal of Agrcultural Economcs, 72: Heen D and Wessells CR (1990). Demand System Estmaton wth Mcrodata: A Censored Regresson Approach, Journal of Busness & Economc Statstcs, 8(1): Huang KS (1996). Nutrent Demand Elastctes n A Complete Food Demand System, Amercan Journal of Agrcultural Economcs, 78: Huang KS and Ln BH (2000). Estmaton of Food Demand and Nutrent Elastctes from Household Survey Data. Food and Rural Economcs Dvson, Economc Research Servce, U.S. Department of Agrculture. Techncal Bulletn No Noor MI (2002). The Nutrton and Health Transton n Malaysa, Publc Health Nutrton 5(1A):

12 Appendx 1. Maxmum lelhood estmates of the LA/AIDS model Beef Por Mutton Poultry Other meats Coeffcent Coeffcent Coeffcent Coeffcent Coeffcent (Std. Error) (Std. Error) (Std. Error) (Std. Error) (Std. Error) Intercept (0.0203)*** (0.0136)*** (0.0085)*** (0.0181) - Log (prce of beef) (0.0040)*** (0.0028)*** (0.0017)*** (0.0054)*** - Log (prce of por) (0.0086)*** - (0.0064)* (0.0201)*** - Log (prce of mutton) (0.0925)*** (0.0359) - (0.1257)*** - Log (prce of poultry) (0.0258)*** (0.0187)*** (0.0106)*** - Log (prce of other meats) Log (x/laspeyres prce ndex) (0.0030)*** (0.0021)*** (0.0013)*** (0.0037)*** - Log (household sze) (0.0006)*** (0.0005) (0.0003)* (0.0009)*** - Urban dummy (0.0031)*** (0.0022)*** (0.0013)*** (0.0042) - IMR (0.0033)*** (0.0053)*** (0.0040)*** (0.0181) - Note: Sgnfcance levels are denoted by *** for 1%, ** for 5%, and * for 10%.

13 Appendx 2. Regresson results for Engel curve analyses Coeffcent (Std. Error) Intercept (0.1120)*** Log (total expendture) (0.0077)*** Laspeyres prce ndex (0.0486)*** Log (household sze) (0.0088)*** Urban (0.0103)*** Note: Sgnfcance levels are denoted by *** for 1%, ** for 5%, and * for 10%.