THE TURKISH DEMAND FOR FOOD*
Mehmet Arif ŞAHİNLİ**
ABSTRACT
The main objective of this study is to identify main household demand parameters in Turkey with respect to different food groups. In addition, as for the importance of this study for Turkey, it reveals the expectation that despite advanced technological developments in the globalized world of today. This is important, because food shortage, insecurity, and consumption will continue to be a challenging problem in Turkey’s economy as well as in the global economy.
In this study, price and expenditure elasticities were calculated by applying to the Almost Ideal Demand System (AIDS) approach to expenditure data for the food group acquired by the Household Budget Surveys (HBS) from 2002 to 2011. Household Budget Surveys (HBS) data were used in this study. Price and expenditure elasticities in Turkey under food group for divided five income groups were estimated using the An Almost Ideal Demand System (AIDS) approach. According to the findings obtained price and expenditure elasticities by food group for divided five income groups were calculated. Computed price elasticities using the AIDS model are were found to be in good agreement with economic theories. At that time, price elasticities are negative. Our analyses demonstrated that food group elasticities for all income groups examined in this study were normal goods.
While the lowest price demand elasticity was observed in second %20 income group, the highest price demand elasticity was observed in fifth %20 income group. In line with this, it is possible to say that consumers are more responsive to price changes. In this respect, we can say that Although fifth %20 income group is more sensitive to food price changes, second %20 income group is less responsive to this food price changes.
Key Words: An almost ideal demand system, Price and Expenditure Elasticities, Income groups.
Turkish Studies
THE TURKISH DEMAND FOR FOOD ÖZET
Bu çalışmanın temel amacı olarak, farklı gelir gruplarına ait gıda gruplarına göre Türkiye'de başlıca hanehalkı talep parametrelerinin tahmini tespit edilmeye çalışılmıştır. Buna ek olarak, Türkiye için bu çalışmanın önemi olduğu gibi, bugün küreselleşen dünya için de önemli olduğu görülecektir. Bu önemlidir çünkü gıda sıkıntısı, güvensizlik, ve tüketim hem Türkiye ekonomisi hem de küresel ekonomi için zor bir sorun olmaya devam edecektir.
Bu çalışmada, fiyat ve harcama esneklikleri Yaklaşık İdeal Talep Sistemi (AIDS) yaklaşımı çerçevesinde, 2002-2011 yıllarına ait Hanehalkı Bütçe Anketleri (HBA) verileri kullanılarak gıda grubu için harcama verilerine uygulanarak hesaplamalar yapılmıştır. Bu çalışmada, Hanehalkı Bütçe Anketleri (HBA) verileri kullanılmıştır. Bölünmüş beş gelir grubu için gıda gruplarına göre, Türkiye için fiyat ve harcama esneklikleri Yaklaşık İdeal Talep Sistemi (AIDS) yaklaşımı kullanılarak tahmin edilmiştir. Elde edilen bulgulara göre, bölünmüş beş gelir grubu için gıda grubuna ait fiyat ve harcama esneklikleri hesaplanmıştır. Yaklaşık İdeal Talep Sistemi (AIDS) modeli kullanılarak hesaplanan fiyat esneklikleri, ilgili ekonomik teoriler ile iyi bir uyum içinde olduğu tespit edilmiştir. Aynı zamanda, gıda grubuna ilişkin fiyat esneklikleri negatif çıkmıştır. Analizimiz sonuçlarına göre, incelenen tüm gelir grupları için gıda grubuna ait esnekliklerin normal bir mal olduğu görülmüştür.
En düşük fiyat talep esnekliği ikinci %20 gelir grubunda gözlenirken, en yüksek fiyat talep esnekliği beşinci %20 gelir grubunda gözlenmiştir. Buna paralel olarak, tüketicilerin fiyat değişimlerine daha duyarlı olduğunu söylemek mümkündür. Bu bağlamda, diyebiliriz ki beşinci %20 gelir grubu gıda fiyat değişimlerine daha duyarlı olmasına rağmen ikinci %20 gelir grubu bu fiyat değişimlerine daha az duyarlıdır. Anahtar Kelimeler: Yaklaşık İdeal Talep Sistemi, Fiyat ve Harcama Esneklikleri, Gelir Grupları.
Introduction
The main goal of this study is to analyze sustainable consumption behavior of households in Turkey. Although household consumption expenditures are composed of twelve commodity groups, budget share for expenditures is the important component measure. In study, using the via the price and expenditure elasticities, it was possible to monitor for which food groups the customers were willing the pay most or least. The AIDS approach was chosen in our analyses because it (i) provides first order approximation to any demand system, (ii). provides definite estimations of axioms of choice, (iii) aggregates consumers perfectly, (iv) has a functional form consistent with household budget data; (v) allows estimates in the form of linear approach, and (vi) can be easily used to test homogeneity and symmetry constraints 2.
Although numerous studies have been conducted to analyze demands for expenditure groups in various countries, such studies are highly scarce in Turkey. In earlier studies conducted
in Turkey, cross section data were often used and time series data were insufficient. Only a few studies analyzed the demands for food items 1, 5, 7, 8, 10-11.
In this study, our data was established as a cross-section data set. The econometric model was constructed using the data compiled from b Household Budget Surveys (HBS) price and expenditure elasticities for the entire Turkey were acquired for the period of 2002 and 2011. Price and expenditure elasticities were found to be in agreement with the parameters estimated via the AIDS. According to the results obtained, consumer demand estimates for households in Turkey were analyzed.
Studies conducted related with the AIDS in Turkey and out of the country were examined. Elasticities reported from earlier studies are summarized as follows: Computed the food price elasticity as 0.07 in the levels model and 0.22 in the first order difference model 4. Used a
dynamic-linear an almost ideal demand system to estimate 11 aggregated product groups. The expenditure and price elasticities were reported to be respectively 0.37 and -0.32 for solely food-relevant values
2. Examined the post-war consumer behavior of the USA via the AIDS approach They reported
food expenditure elasticity of 2.06 with no autocorrelation and 1.11 with autocorrelation 3. Used
meat consumption and socio-demographic data of the SUSENAS surveys of household food expenditure and consumption of 1990, 1993, and 1996 to estimate the meat demand in Indonesia. The estimated prices of beef and the poultry group were -0.92 and -1.09, respectively 6. Compiled
per capita consumption expenditures data in Belgium, the United Kingdom and the United States of America between years 1961 and 1978 tested the quadratic expenditure system. Price elasticities were reported to be for Belgium, the United Kingdom and the United States of America 0.463, -0.08, and -0.71, respectively 9.
In Turkey, a few Econometric studies on demand analysis have been reported as follows: Used data relevant to food and food sub-groups outside household consumption expenditures 1-7.
Investigated the relations between the demands for certain food products important in human nutrition and the factors affecting the demand for this foodstuff in Turkey. She estimated food expenditure elasticities for rural and urban areas as 0.6316 and 0.7172 on average 5. Using the data
obtained through household food consumption surveys conducted in eight periods in about two years and the LA /AIDS model, he estimated the central demand model of Erzurum province and established the elasticities, which are fundamental data for food consumption that could be be used in establishing food policies 1. Estimated income, price and savings elasticity estimates to analyze
consumer behavior patterns using the AIDS by regions in the rural and urban areas in Turkey 8.
Data of the household income and consumption expenditure surveys conducted by the Turkish Statistical Institute for 1994 and 2003 years were used; income, price, and cross price elasticities under six aggregated product groups were estimated within the framework of the an almost ideal demand system approach for food expenditures; and estimation of household consumers’ food demand in Turkey was analyzed. Expenditures by product groups and price elasticities were obtained, and the product groups were aggregated as bread and cereals; meat, fish, and poultry; milk and dairy products, oil and egg; vegetables and fruits; various fast food and alcoholic and non-alcoholic beverages 11. Turkish consumer behaviors models for Turkey, urban and rural districtions
are made an analysis by estimating income and price elasticities for food and non-alcoholic beverages group by applying An Almost Ideal Demand System. Household income and consumption expenditure data between 2002-2006 years are used. Expenditure elasticities for Turkey, urban and rural were calculated and respectively 0.975, 0.961 ve 0.992 10.
Material and Methods
As known, TurkStat has launched a continuous survey application in 2002. The essential changes in definition and concepts of the survey arise in 2002 survey which is the first survey after
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survey was changed as “Household Budget Survey (HBS)” since 2002 whereas it was “Household Income and Consumption Expenditure Survey (HICES)” in 1994. The level of estimation was Turkey, urban and rural areas, 7 geographical regions and 19 independent provinces in 1994 HICES whereas, it was changed as Turkey, urban and rural settlements in 2002, 2004-2007 HBS, and Turkey, urban and rural areas, Classification of Statistical Regional Units Level 1 and urban/rural area distinction for each Level 1 and Level 2 in 2003 HBS. It was included 10 expenditure groups in 1994 HICES and 12 expenditure groups beginning from 2002 HBS 12.
The consumption expenditure values of the households per month are listed from the least amount to the most amount within the month, the households were divided in five equal parts and quintiles were formed and share of expenditure of each group was calculated. Since the quintiles are formed separately for urban and rural settlements, values for Turkey can not be obtained from the total of the urban and rural values. It is also caused by the fact that each level of settlement was listed independently; the household quintiles were formed and sub features within these groups were calculated separately 12.
The HBS data between 2002 and 2011, the method of which is given above by the Turkstat were used in this study. This survey data were organized and changed with relevant to the researcher’s aim and objective.
Organization of Data Sources are given as follows:
Household Income and Consumption Expenditures Survey of between 2002 and 2011 were obtained from Turkish Statistical Institute. In the data relevant between 2002 and 2011, general sum of total monthly consumption expenditures and expenditure values regarding food group was taken.
12 month-consumer prices index figures were used from the TurkStat’s Price Statistics database. Price indexes belong to food group was used. After that price data were converted into real price values.
The data set created for study use was distributed by food group. Moreover, the data which were regions in the cross section and 10 year-observations of 2002 and 2011 in the time section were combined.
Model and Estimation Methods are given as follows:
In this section, how to make an estimation parameter of an almost ideal demand systems are shown as follows:
If the basic model is written for each commodity, the following equations might be obtained:
w1 = 1 +1.1lnp1 + 1.2lnp2 + + 1.12lnp12 + 1ln (x/P*) + u1
w2 = 2 +2.1lnp1 + 2.2lnp2 + + 2.12lnp12 +2ln (x/P*) + u2 (1)
………. w12 = 12 + 12.1lnp1 +12.2lnp2 + +12.12lnp12 +12ln(x/P*) + u12
In this equation, wi represents the budget share of ith good, pj is price of the jth good, x is
total expenditure on all goods and P* is price index.
It is possible to generalize and demonstrate the system in the equation 1 with matrices for n number of products and k number of variables:
y = X + u Where,
y = the column vector of the observations (n x1) relevant to yi dependent variable;
X = (nxk) matrix indicates n observation value of explanatory variables from X1 to Xk and
is known as data matrix. The first column composed of one (1) values indicates the constant term. β = the column vector of k number of unknown parameters (k x 1)
u = the column vector of n number of ui error terms (nx1).
Since additivity and negativity constraints are automatically met by the model in the AIDS, no test is done for these constraints.
Price elasticity belongs to AIDS model are calculated as follows: 5.
i i ij ii w
1 Price elasticity (2) Expenditure elasticity Results and DiscussionThe estimation of model parameters was calculated by The Least Squares method. Estimation of the model was made by using Eviews 7 econometrics package program. The data relevant to the food group which take place in the Household Budget Survey of between 2002 and 2011 were applied to the An Almost Ideal Demand System.
Table 1. An Almost Ideal Demand System Statistics, 2002-2011
Income group R2 DW 1. %20 Income group 0.97 2.198 2. %20 Income group 0.97 2.218 3. %20 Income group 0.97 2.423 4. %20 Income group 0.96 2.654 5. %20 Income group 0.97 2.806
In Table 1, calculated R2 and DW values of the almost ideal demand system are given.
While the lowest R2 value %96.0 was in the fourth %20 income group, R2 values of the
remains %20 income groups %97.0 are the same. DW values relevant to the almost ideal demand system are given in Table 1. For 10 observations at 5% level and one explanatory variable taken out of Durbin-Watson table, dL = 0.879 and du = 1.320. When the DW values are considered,
fifth %20 income group isn’t located positive or negative regions that are located in undecided region. Between first and fourth %20 groups, we can’t reject null hypothesis or alternative hypothesis because there aren’t any positive or negative autocorrelations in this range (Table 1).
Price and expenditure elasticities values with relevant to food group for AIDS model is calculated for estimated parameter values that are as follows in Table 2.
Table 2. Distribution of price and expenditure elasticities for food group, 2002-2011
Income group Price Elasticity Expenditure Elasticity
1. %20 Income group -0.221166 0.948471
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3. %20 Income group -0.529792 0.862281
4. %20 Income group -0.284194 0.896214
5. %20 Income group -1.721446 0.783854
Price Elasticity (PE) can be calculated by the percent change in the quantity demanded by the percent change in price. PE measures the responsiveness of a change in demand, after a change in price. When the PE of a good is greater than one in absolute value, the demand is said to be elastic; it is highly responsive to changes in price.
Goods which are elastic, tend to have some or all of the following characteristics: a. They are luxury goods, expensive and a big % of income e.g. sports cars and holidays. b. Goods with many substitutes and a very competitive market. Demands with an elasticity less than one in absolute value are inelastic; the demand is weakly responsive to price changes.
Goods which are inelastic tend to have some or all of the following features: a. They have few or no close substitutes, e.g. petrol, cigarettes. b. They are necessities and addictive. c. They cost a small % of income or are bought infrequently. Demands with an elasticity equal to one in absolute value are unit elastic; the demand is smoothly responsive to price changes.
According to the AIDS model, price elasticities are suitable for economic theory that is values of price elasticities are negative. While food price elasticity of fifth %20 income group is elastic, food price elasticities of first %20 income group, second %20 income group, third %20 income group and fourth %20 income group are inelastic.
When the price elasticities of the food group for all income groups are considered, in case of 1% increase food group in first %20 income group, this might be interpreted as demand for food group will grow by 0.221166%, demand for food group in second %20 income group will grow by 0.003221%, demand for food group in third %20 income group will grow by 0.529792%, demand for food group in fourth %20 income group will grow by 0.284194% and demand for food group in fifth %20 income group will grow by 1.721446%.
While the lowest price demand elasticity was observed in second %20 income group, the highest price demand elasticity was observed in fifth %20 income group. In line with this, it is possible to say that consumers are more responsive to price changes. Although fifth %20 income group is more sensitive to food price changes, second %20 income group is less responsive to this food price changes. Price elasticities are calculated to be negative as expected in accordance with the economic theory.
Expenditure elasticity was calculated for each variable according to the estimated parameter values by using elasticity formulas with relevant to the Almost Ideal Demand System. Expenditure elasticities belong to the commodity groups are given in Table 2. Expenditure elasticity reveals how the demanded amounts of the products would differ in the face of income changes. In line with expenditure elasticities, properties of the products are defined. Those with an expenditure elasticity higher than 0 are normal goods, whereas those with one less than 0 are inferior goods.
After Table 2 is examined belong to income groups, we emphasized that found to be 0.948471 for the first %20 income group, 0.875538 for the second %20 income group, 0.862281 for the third %20 income group, 0.896214 for the fourth %20 income group and 0.783854 for the fifth %20 income group. It is understood from these that food group elasticities belong to all examined income groups are normal goods.
According to the calculated expenditure elasticity belong to the food group, assuming all the other variable constant, in case of an average increase of 1% in the first %20 income group, it is possible to say that food group expenditure will increase by 0.948471%, in case of an average increase of 1% in the second %20 income group, it is possible to say that food group expenditure will increase by 0.875538%, in case of an average increase of 1% in the third %20 income group, it is possible to say that food group expenditure will increase by 0.862281%, in case of an average increase of 1% in the fourth %20 income group, it is possible to say that food group expenditure will increase by 0.896214% and in case of an average increase of 1% in the fifth %20 income group, it is possible to say that food group expenditure will increase by 0.783854%.
Conclusion
Although expenditure elasticities between 2002 and 2011 had positive values, price elasticities were found negative in accordance with the expectations of the economic theory. Price elasticities were found in line with the parameters estimated from the AIDS. Findings for the price elasticities for AIDS model are consistent with economic theory. At that time, price elasticities are negative.
While the lowest price demand elasticity was observed in second %20 income group, the highest price demand elasticity was observed in fifth %20 income group. In line with this, it is possible to say that consumers are more responsive to price changes. In this respect, we can say that Although fifth %20 income group is more sensitive to food price changes, second %20 income group is less responsive to this food price changes.
According to the income groups, we emphasized that found to be 0.948471 for first %20 income group, 0.875538 for second %20 income group, 0.862281 for third %20 income group, 0.896214 for fourth %20 income group and 0.783854 for fifth %20 income group. It is understood that all of the goods examined are normal goods.
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