Application of linear approximate almost ideal demand system model to studying food consumption patterns in Malaysia
With growing income, consumption of food in Malaysia has shifted from starchy staples towards livestock products, wheat, seafood, vegetables, and fruits. This has been powered by a rise in the populace of Malaysia and its purchasing power, which puts the focus on understanding the consumption...
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| Format: | Thesis |
| Language: | English |
| Published: |
2016
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/66855/1/FEP%202016%2037%20%20IR.pdf |
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| Summary: | With growing income, consumption of food in Malaysia has shifted from starchy
staples towards livestock products, wheat, seafood, vegetables, and fruits. This has
been powered by a rise in the populace of Malaysia and its purchasing power, which
puts the focus on understanding the consumption patterns in this country. The food
requirement is guided by the consumption patterns. This study aims to quantify the
impact of a family’s socio-demographic characteristics in terms of outlay on 11 food
groups in Malaysia by employing LES model, and the projection in food consumption
patterns in term of the income elasticity, compensated and uncompensated own-price
elasticity by employing the LA/AIDS model. The results are utilised to estimate
prospective consumption of food up to the year 2025. The study utilised data from the
Household Expenditure Survey (HES) 2009/2010, conducted by the Department of
Statistics, Malaysia. A total of 21077 samples were obtained. The study relies
primarily on the descriptive as well as econometric analysis of the most recent. The
projection is carried out by employing the Statistical Analysis System (SAS) program,
and through the application of the Iterative Seemingly Unrelated Regression (ITSUR)
process. The Full Information Maximum Likelihood (FIML) method was employed to
project the demand model. More than 50 percent of the parameter estimates in every
equation system in this study are statistically significant, and the model specification is
appropriate. The projection outcomes signify that families exhibit a significantly rising
food consumption with higher income at a 1% significance level. The sign and scale of
the elasticities show that cereal, rice, fruits, oil, vegetables, sugar and other food are
‘necessities to price change’ among families in Malaysia. Likewise, fish, cereal, milk,
vegetables and other foods tend to be ‘luxurious to income change’. Notably, ownprice
elasticities for fish, meat, and other food are quite elastic with change in price.
This signifies the behaviour of Malaysian customers correctly, and if fish, meat and
other food products are imported, it could bring down the prices, benefitting sellers as
well as consumers. The income elasticity is more pronounced in rural areas than urban
regions. Usually, the income elasticities for 11 food items, with the exception of other
foods, are comparatively high in the LA/AIDS model in comparison to the Tobit model. This is because, given the economic scenario in Malaysia, several poor families
are dealing with tight budgetary limits. Moreover, all chosen food commodity groups
are termed as very essential items as they cater to the basic needs of people. Outlays on
all commodities are considerably driven by the income of the household. Furthermore,
size of the family, the reference person’s age, and gender of the head of family are
crucial variables which would affect the purchase decisions. In terms of estimated food
consumption until the year 2025, self-sufficiency in food may unlikely be achieved for
Malaysia. Over the period of estimation, the percentage of cereal consumption is likely
to be higher compared to rice products in 2020 and 2025. There would be a downhill
trend in the consumption of fish, rice, and vegetables, and an upward trend for meat,
cereal, and fruits for the next 10 to 15 years, as against the base year 2010. Lastly, our
findings imply that income-focused policies are vital for attaining better nutrition and
diminish the issue of unbalanced diets in Malaysia. The country would have to raise its
production of food and enhance its food distribution systems to ensure enough supply
for its burgeoning populace. |
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