Calculation of price and expenditure elasticities for food in Germany: Estimation of a LA/AIDS

Abstract

Complete and consistent, i.e. theoretically appropriate demand systems have seldom been developed for Germany. Econometric food demand analyses have concentrated on single products and product groups. Generally, demand functions have been estimated using single equation methods. The purpose of this paper is to analyse the food demand in former West Germany on the basis of the Almost Ideal Demand System (AIDS) developed by DEATON and MUELLBAUER (1980). A two-stage demand system is based on data for the household type III gathered on a monthly basis during the period from 1966 to 1997. At a first stage, five aggregates of food (meats and fish; dairy and eggs; edible fats; cereals, fruits and vegetables; and other foods) and one non-food group are specified. The second stage includes four groups of meat (beef, pork, poultry, and other processed meats) and fish. The results of the demand system allow statements about the changes in food demand over time periods.