Application of the Almost Ideal Demand System (AIDS) Model in the Demand of the Household Commodity Group in Jordan
DOI:
https://doi.org/10.35516/jjes.v9i1.250Keywords:
Almost Ideal Demand System, Homogeneity, Symmetric, Price and Income ElasticitiesAbstract
In this study, we provide estimates of An Almost Ideal Demand System (AIDS), as reflected in the demand analysis for Jordan: the free, the homogeneous, the symmetric, and the restricted AIDS models were estimated. The evaluated total expenditure elasticities indicate that the demand for food and housing is inelastic concerning total expenditure (income), whereas the demand for all the other commodity groups is elastic. The uncompensated own-price elasticities indicate that demand for food and clothing items is inelastic and inelastic for all other commodity groups. One striking result was that the own-price elasticity for food seems to be relatively very large compared to the estimated for other countries. Based on the log-likelihood ratios, homogeneity and symmetry given homogeneity for the whole system were rejected. These findings suggest that the demand for aggregate commodity groups in Jordan is not consistent with the theory of demand
References
Anderson, Gl J., & Blundell R .(1983). Testing Restrictions in a Flexible Dynamic Demand System: An Application to Consumers’ Expenditure in Canada. Review of Economic Studies, 50 (3), 397–410.
Andrikopoulus, A.; Brox, J., & Carvalho, E. (1997). The demand for domestic and imported alcoholic beverages in Ontario, Canada: a dynamic simultaneous equation approach. Applied Economics, 29, 945-53.
Andrikopoulus, A. A., & Loizides, J. (2000). The demand for home-produced and imported alcoholic beverages in Cyprus: The AIDS approach. Applied Economics, 32, 1111-1119.
Banks, J.; Blundell, R. W., & Lewbel, A. (1997). Quadratic Engel Curves and Consumer Demand. The Review of Economics and Statistics, 79 (4), 527–539.
Barten, A. P. (1969). Maximum Likelihood Estimation of a Complete System of Demand Equations. European Economic Review, 1(1), 7–73.
Barten, A. P. (1967). Evidence on the Slutsky Conditions for Consumer Demand. Review of Economics and Statistics, 49: 77-84.
Bayu, Kharisma; Armida S. Alisjahbana; Sutyastie , & Putri, Praditya (2020). Application of the Quadratic Almost Ideal Demand System (QUAIDS) Model in the Demand of the Household Animal Sourced Food in West Java. The international peer-reviewed scientific journal, Volume XII, pp. 23-35.
Blanciforti, L. A. (1982). The Almost Ideal Demand System: A Comparison And Application To Food. American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association), No. 79459 .
Blanciforti, L. A., & Green, R. (1983). An Almost Ideal Demand System Incorporating Habits: An Analysis of Expenditures on Food and Aggregate Commodity Groups. The Review of Economics and Statistics, 65 (3), 511–515.
Blanciforti, .L. A.; Green, R. D., &, King GA. (1986). U.S. Consumer Behavior Over the Postwar Period: An Almost Ideal Demand System Analysis. Monograph Number 40 (August 1986), Giannini Foundation of Agricultural Economics, University of California.
Bopape, L., & Myers, R. (2007). Analysis of Household Demand for Food in South Africa: Model Selection, Expenditure Endogeneity, and the Influence of Socio-Demographic Effects. African Econometrics Society Annual Conference, Cape Town, South Africa.
Brannlund, R.; Ghalwash, T., & Nordstrom, J. (2007). Increased Energy Efficiency and the Rebound Effect: Effects on Consumption and Emissions. Energy Economics, 29 (1), 1–17.
Burger, R. P.; Coetzee, L.; Kreuser, C. F., & Rankin, N. A. (2017). Income and Price Elasticities of Demand in South Africa: An Application of The Linear Expenditure System. South African Journal of Economics, 8 (4): 491-514.
Buse, A. (1994). Evaluating the linearised almost ideal demand system. American Journal of Agricultural Economics, 76, 781-93.
Chambwera M., & Folmer H. (2007). Fuel Switching in Harare: An Almost Ideal Demand System Approach. Energy Policy, 35 (4), 2538–2548.
Chesher, A., & Rees, H. (1987). Income elasticities of demand for foods in Great Britain. Journal of Agricultural Economics, 38: 433–448.
Christensen, L. R.; Jorgenson, D. W., & Lau, L. J .(1975). Transcendental Logarithmic Utility Functions. American Economic Review, 65: 367-83.
Deaton, A., & Muellbauer, J. (1980). An Almost Ideal Demand System. The American Economic Review, 70 (3), 312–326.
Farrell, L., & Shields, M. A. (2007). Children as Consumers: Investigating Child Diary Expenditure Data. Canadian Journal of Economics, 40 (2): 445–467.
Gao X.; Wailes, E., & Cramer, G. (1995). A microeconometric model analysis of US consumer demand for alcoholic beverages. Applied Economics, 27: 59-69.
Green, R., & Alston, J. M. (1990). Elasticities in AIDS models. American Journal of Agricultural Economics, 72: 442–445.
Hausman, J. A., &, Leonard, G. K. (2007). Estimation of Patent Licensing Value Using a Flexible Demand Specification. Journal of Econometrics, 139 (2): 242–258.
Henning, C., & Henningsen, A. (2007). Modeling Farm Households Price Responses in the Presence of Transaction Costs and Heterogeneity in Labor Markets. American Journal of Agricultural Economics, 89 (3): 665–681.
Huang, M. H.; Jones, E., & Hahn, D. E. (2007). Determinants of Price Elasticities for Private Labels and National Brands of Cheese. Applied Economics, 39 5): 553–563.
Huo, X., & He, L. (2011). Import demand model choice and elasticity analysis : take United States apple juice import demand as an example. Stat. Inform. ForumNo. 9.
Hutasuhut, M.; Chang, H.S.; Griffith, G.; O’Donnell, C., & Doran, H. (2001). The Demand for Beef in Indonesia: Implications for Australian Agribusiness, Agricultural and Resource Economics, 4: 2-12.
James , S., & Marchant, M. A. (2003). Imports versus Domestic Production: A Demand System Analysis of the U.S. Red Wine Market. Review of Agricultural Economics, 25 (1):188-202.
Keefe, A .M. (2002). International shrimp trade: New paradigms and market changes. Dissertation, Auburn University, Auburn, Alabama.
Klein, L. R., & Rubin, H. (1947). A Constant-Utility Index of the Cost of Living. The Review of Economic Studies, 15 (2): 84–87.
Mergos, G. J., & Donatos, G. S. (1989). Consumer behavior in Greece: An application of the Almost Ideal Demand System. Applied Economics, 21: 983-993.
Molina, J. E., & Gil, A. I. (2005). The Demand Behavior of Consumers in Peru: A Demographic Analysis Using the QUAIDS. Journal of Developing Areas, 39 (1):1. 191-206.
Moore, T., & Green, C. J. (2007). A Portfolio Approach to Firms’ Financing Decisions: Evidence from India Using the Almost Ideal Demand System. In V Murinde (ed.), Accounting, Banking and Corporate Financial Management in Emerging Economies, number 7 in Research in Accounting in Emerging Economies, pp. 347–368.
Musyoka, M. P.; Kavoi, M. M., & Omiti, J. M. (2014). Food consumption patterns and distributional welfare impact of import tariff reduction on cereals in Kenya, African Journal of Agricultural and Resource Economics, 9 (3): 183-199.
Wambua, T.; Musyoka, M.; Lagat, J.; Ouma, , D., & Gamba, P. (2010) Structure and properties of urban household food demand in Nairobi, Kenya: Implications for urban food security. Food Security 2 (2): 179–193.
Nelson J. P., & Moran J .R. (1995). Advertising and US alcoholic beverage demand: Systemwide estimates. Applied Economics, 27: 1225-36.
Pashardes, P. (1993). Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation. The Economic Journal, 103: 908–915.
Raknerud, A.; Skjerpen, T., & Swensen, A. R. (2007). A Linear Demand System within a Seemigly Unrelated Time Series Equations Framework. Empirical Economics, 32 (1): 105–124.
RAY, R. (1980). Analysis of a time series of household expenditure surveys for India. The Review of Economics and Statistics, 62 (1): 595-602.
Ruwis, K.; Alderiny, M., &, Alrabeeh, B. (2007). Using an Almost Ideal Demand System (AIDS) in the Analysis of Hydrocarbons. Faculty of Commerce, Tanta University, Scientific Journal, Trade and Finance 2: (1).
Sahinli, M. A., &. Fidan, V. H. (2012). Estimation of food demand in Turkey: method of an almost ideal demand system. Quality&Quantity, 46: 653–663.
Stone, R. (1954). Linear Expenditure Systems and Demand Analysis: An Application to the Pattern of British Demand. The Economic Journal, 64: 511-527.
Theil, H. (1965). The Information Approach to Demand Analysis. Econometrica, 33: 67-87.
Theil, H. (1975). Theory and Measurement of Consumer Demand. Two Volumes. Amsterdam: North-Holland Publishing Company. Theil, H. (1980). The System-Wide Approach to Microeconomics. Chicago: The University of Chicago Press.
Vidyashankara, S.; Wilson, W. W. & Johnson, D. D. (1999). Import demand for malt in selected countries: A linear approximation of AIDS. Canadian Journal of Agricultural Economics, 47: 137-149.
West, S E., & Williams R. C. I. (2007). Optimal Taxation and Cross-Price Effects on Labor Supply: Estimates of the Optimal Gas Tax. Journal of Public Economics, 91 (3/4): 593–617.
Xiao, N.; Zarnikau, J., & Damien, P. (2007). Testing Functional Forms in Energy Modeling: An Application of the Bayesian Approach to U.S. Electricity Demand. Energy Economics, 29 (2): 158–166.
Young‐Joo A.; Unji, B.; Byeong, C. L. , & Seul, K. L. (2018). An almost ideal demand system (AIDS) analysis of Korean travelers' summer holiday travel expenditure pattern., International Journal of Tourism Research, 20 (6): 768-778.
Yustika, L., & Purnomosidi, H. (2019). Estimation of Demand Elasticity for Food Commodities in Java Island. Journal of Economics and Policy, 12 (1): 12-26.
