138-014 Yaseen et al.indd - Agricultural Journals

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Muhammad Rizwan YASEEN, Imran QAISER, Nabeela KOUSAR. Government College ...... at www.fao.org/docrep/014/i2330e/i2330e.pdf. UNCTAD price ...

Original Paper

Agric.Econ – Czech, 61, 2015 (7): 332–342 doi: 10.17221/138/2014-AGRICECON

Comparative analysis of the animal products consumption in developing countries: the case study of the South Asian countries Muhammad Rizwan YASEEN, Imran QAISER, Nabeela KOUSAR Government College University, Faisalabad, Pakistan Abstract: Being the most populous countries of South Asia, Pakistan, India and Bangladesh represent about 37% of the world total undernourished population. In these three countries, the growing place of animal products can be observed in the diets, but the levels consumed for animal products remained very low as compared to the world mean. The consumption behaviour of animal products for three countries is presented in the study. Expenditure elasticities, own and cross compensated as well as non-compensated price elasticities of main animal products of these countries are calculated by using a LA/AIDS model applied to yearly data. Milk is income as well as price elastic in Pakistan while all other animal products in all three countries are relatively price inelastic. On the other hand, chicken and eggs are relatively income elastic. The results are compared with other authors in detail. The impact of some government policies to improve the protein and calorie intake by the actions on income and prices for the most vulnerable consumers (low income group) in these countries is also evaluated for Pakistan. Key words: animal food consumption, expenditure elasticities, LA/AIDS, price elasticities, protein and calorie intake

Food demand having a long history is very important in the economic research. There has been a focus on the availability of food since Malthus (1798) whose particular concern was that the population growth would ultimately create demands for an exceeding food supply. About 309 million of around 850 million world malnourished people live in India, Pakistan and Bangladesh according to the State of Food Insecurity in the World (SOFI 2011). So these countries are much concerned regarding the problem of food. Low domestic production and incapacity to buy in the international currencies on the world markets are important causes of the insufficient food consumption in developing countries but mainly the lack of access is due to the low income compared to food prices (World Bank 1981). Therefore, the effect of income and price on the demand for food in the developing countries has been the focus of many studies to explore the further causes of the problem; e.g. Mellor (1983), Behrman and Deolalikar (1987), Alderman (1988). So in this following part of the study, the effect of price and income (expenditure) on the consumption of different animal products is calculated and the different relations between products (substitutes or complements) are presented. 332

In this paper, the objective is to analyze the animal products consumption pattern and its reaction to the expenditures and prices changes in Pakistan, India and Bangladesh. In these three countries, having same colonial past, a growing place of animal products can be observed in diets, but the levels consumed for the total meat remained very low compared to the world mean (FAO). The FAOSTAT tells about the sources of these countries for the protein and calorie intake. Pakistan is the largest consumer of animal products for the protein intake among the three with 23.5 gram/capita/day (40% of the total proteins). India and Bangladesh are behind with 10.2 gram and 7.8 gram, respectively (18% and 15% of the total proteins respectively). For calories, the pattern is the same with Pakistan consuming 468 kcal/capita of animal products per day (20% of the total calories). India and Bangladesh are consuming 197 kcal/capita (8% of the total calories) and 83 kcal/capita (9% of the total calories) respectively. It shows the animal products consumption share in every country’s diet pattern. This kind of results is necessary to calculate the future demand of animal products to attain food security in these countries. This study is an effort with focus on the demand parameters estimation of

Agric.Econ – Czech, 61, 2015 (7): 332–342

Original Paper

doi: 10.17221/138/2014-AGRICECON the main animal products towards this direction. The calculation of the animal products demand elasticities aids to forecast their future demand under different scenarios of prices and income and may be worthy for the policy planners on important policy decisions.

In the LA version of AIDS, the price index is approximated by the linear function:

Žܲ ൌ  σ௜ •୧ ൈ Ž‫݌‬௜ 

(6)

METHODOLOGY

and the elasticities are calculated by the following expressions: For the Marshallian (or uncompensated) elasticity of product i consumption relative to price of product j.

The LA/AIDS approach

‫ ݕݐ݅ܿ݅ݐ݈݈݈݄ܿܽ݁݊ܽ݅ܽݏݎܽܯ‬ൌ ‫ܧ‬௜௝ெ ൌ െɁ௜௝ ൅ 

The Almost Ideal Demand System (AIDS) having considerable advantages over all other models was developed by Deaton et al. (1980a, b). The linear approximation version of the AIDS model called LA/AIDS Alderman (1988) is used in this paper. This model is based on a following particular form of the cost function (Holt and Goodwin 2009):

where δij is the Kronecker delta term (that is 1 when i = j or 0 when i ≠ j For the expenditure (income) elasticity of product i consumption

ɀ௜௝ ‫ݏ‬௝ െ Ⱦ௜  (7) ‫ݏ‬௜ ‫ݏ‬௜



…‘‡‡Žƒ•–‹…‹–›ൌ‫ܧ‬௜ோ ൌ ͳ ൅  ௦ ೔  ೔

(8)

For the Hicksian (or compensated) price elasticities

Ž‫ܥ‬ሺ‫݌‬ǡ ܷሻ ൌ ሺͳ െ ܷሻ Ž ܽሺ‫݌‬ሻ ൅ ܷŽܾሺ‫݌‬ሻ

(1)

while p is the vector of prices of the n products and U denotes the utility index. The value of this index is between 0 (subsistence) and 1 (bliss). There the expenditure share is: ௡

‫ݏ‬௜ ൌ  ߙ௜ ൅  ෍ ɀ௜௝ Ž ‫݌‬௜ ൅  Ⱦ௜ Ž ௝ୀଵ

‫ܯ‬  ܲ

where i, j = 1, 2, …, n

(2)

where pi and xi are the price and consumption of ith good, respectively, while M is the total spending of the n goods. The price index P is defined by ௡





ͳ Ž ܲ ൌ Ƚ଴ ൅  ෍ Ƚ௞ Ž ‫݌‬௞ ൅  ෍ ෍ ɀ௞௝ Ž ‫݌‬௞ Ž ‫݌‬௝  (3) ʹ ௞ୀଵ

௞ୀଵ ௝ୀଵ

with

ɀ௜௝ ൌ 

ͳ ‫כ‬ ൫ɀ ൅  ɀ‫כ‬௝௜ ൯ ʹ ௜௝

(4)

Linear homogeneity of the cost function, the symmetry of the second-order derivatives, and adding up across the share equations implies the following set of restrictions: ௡







෍ Ƚ௜ ൌ ͳǡ ෍ ɀ௜௝ ൌ ෍ ɀ௜௝ ൌ Ͳǡ

෍ Ⱦ௜ ൌ Ͳǡ

௜ୀଵ

௜ୀଵ

௜ୀଵ

ɀ௜௝ ൌ ߛ௝௜ 

௝ୀଵ

(5)

‫ܧ‬௜௝ு ൌ ‫ܧ‬௜௝ெ ൅ ‫ܧ‬௜ோ ‫ݏ‬௜ 

(9)

For Allen substitution elasticities1

‫ܣ‬௜௝ ൌ ‫ܧ‬௜௝ Ȁܵ௝ 

(10)

INTERPRETATION AND USES OF THE LAGGED VARIABLES In general, the changes in price or income do not influence the food market immediately and completely in the year in which they took place. In fact the impact on consumption of each product is felt over several periods and depends on the situation during the previous period. To model this, we introduced the lagged value of the share of expenditure in the second member of the various expenditure share equations. For example a simplified equation is:

‫ݏ‬௜ ሺ‫ݐ‬ሻ ൌ  ݃଴ ൅  ܽ௜ ‫ݏ‬௜ ሺ‫ ݐ‬െ ͳሻ ൅ ܿ௜ ൈ Ž ‫݌‬௜ ሺ‫ݐ‬ሻ ൅ ൅ ݀௜ ൈ Ž ‫ܯ‬ሺ‫ݐ‬ሻΤܲሺ‫ݐ‬ሻ

(11)

The parameter ai measures the importance of the “memory” effect. In term of variation between year t and year t – 1, one can write:

ο‫ݏ‬௜ ሺ‫ݐ‬ሻ ൌ  ܽ௜ ൈ οܵ௜ ሺ‫ ݐ‬െ ͳሻ ൅ ܿ௜ ൈ ο Ž ‫݌‬௜ ሺ‫ݐ‬ሻ ൅  ‫ܯ‬ሺ‫ݐ‬ሻ ൅  ݀௜ ൈ ο Ž  ܲሺ‫ݐ‬ሻ

(12)

1

Allen elasticity measures substitution level between two products. More precisely its value represents percentage changes of ratio of consumption between two products when their relative price changes by 1%.

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Original Paper

Agric.Econ – Czech, 61, 2015 (7): 332–342 doi: 10.17221/138/2014-AGRICECON

That can be written as: ο୧ ሺ–ሻ ൌ ƒ୬୧ οܵ௜ ሺ‫ ݐ‬െ ݊ሻ ൅ ܿ௜ ൈ ሺͳ െ ܽ௜௡ ሻΤሺͳ െ ܽ௜ ሻ ൈ ‫(  ݔ‬13)

when for n periods: Δlnpi(t) = x is constant and real income is constant: M(t)/P(t) = constant If ai is inferior to 1 (and very small), then the term ௡ ܽ௜  become negligible and the variation of expenditure share is equal to ci × x (expression without the lagged variable) multiplied by a specific coefficient ݇௜ ൌ ሺͳ െ ܽ௜௡ ሻȀሺͳ െ ܽ௜ ሻ ൎ ͳȀሺͳ െ ܽ௜ ሻ that permits to pass from short term elasticity EST to the long term elasticity ELT. Generally (for the Hicksian, Marshallian and income elasticity), one can write:

‫ܧ‬௜௝௅் ൌ ݇௜ ‫ܧ‬௜௝ௌ் 

(14)

In the “normal case” (|ai|  1) in Pakistan. That means when the income (more precisely the expenditure on animal products) increases, the Indian consumer buys more eggs, chicken, other meat and milk among all animal products. Likewise, the chicken and goat meat are superior products in Bangladesh. One surprising result is the fact that the goat/sheep meat is “inferior good” in Pakistan and India. This can be explained by the fact that in these countries, the poultry meat is preferred to the cattle/ sheep meat due to the difference of price, so when the income increased, people used more other animal products. This could also be explained for Pakistan by the fact that the goat/sheep meat consumption is more tied to religious reasons than to prices The Marshallian price elasticities for six (or five) products (eggs, milk, bovine meat, poultry meat, other meat and goat/sheep meat) of Pakistan, India and Bangladesh, respectively, are presented in Table 6. Like the Hicksian ones, these elasticities have not 338

been calculated for a specific year but for the mean values for the period 1991–2008. The values of the expenditure shares s i and s j appearing in the share and the elasticities equations have been replaced by their mean of the time period. Milk is price elastic in Pakistan (> 1) while all other animal products in all three countries are relatively price-inelastic ( 1), making them expenditure elastic products. Our results are different for the chicken and goat meat elastcities, which were previously calculated by (Bouis 1992; Akmal 1994). Thus, the

Pakistan government should increase the income of the poor to increase the nourishment level by giving subsidies as it would increase the consumption of the chicken and milk more than the income increase. Whereas in Bangladesh, all the products in our analysis are price inelastic. These results are in line with the previous studies of (Wadud 2006; Huq and Arshad 2010; Kumar et al. 2012). Therefore, the expenditure elasticities for chicken and goat meat are (>1) making them the expenditure elastic products in Bangladesh. The results of our study are in line with the previous studies of (Wadud 2006; Kumar et al. 2010). However, the elasticities for milk and eggs in our studies are in contrast with the previous ones making them expenditure inelastic products (Pitt 1982; Ahmed and Shams 1993; Huq et al. 2010; Kumar et al. 2012). The Bangladesh government should also concentrate on increasing the income level of the poor which will ultimately increase the consumption of the chicken and goat meat in their diet leading to boosting their protein and caloric intake. Our results exhibit more or less the same pattern like in other authors. The respective governments can pursue the policy of enhancing the nourishment of their citizens through considering the share of every food sector. As in Pakistan, animal products are making the big share so the government should focus on this sector more. All our six animal products are price-inelastic in all three countries. So, it would not be rational for the governments to decrease the prices of the products to boost the nourishment level. However, in every country two or more of the animal products are expenditure elastic. Thus, the respective governments can consider the option to increase the income level (by giving subsidy to consumer) or to achieve the target of better protein and calories intake by decreasing prices (by price subsidy).

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Original Paper

Agric.Econ – Czech, 61, 2015 (7): 332–342 doi: 10.17221/138/2014-AGRICECON

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Contact address: Muhammad Rizwan Yaseen, Government College University, Faisalabad, Pakistan e-mai: [email protected]

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