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Testing for Homogeneity and Habit Formation in a Flexible Demand Specification of U.S. Meat Consumption
Author(s) -
Pope Rulon,
Green Richard,
Eales Jim
Publication year - 1980
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1239780
Subject(s) - citation , editorial board , associate editor , consumption (sociology) , agricultural economics , library science , economics , sociology , computer science , social science
of the demand parameters are obtained by using maximum likelihood techniques, and tests of homogeneity and habit formation are based on the likelihood ratio procedure. The analyses utilize annual U.S. data on beef, pork, poultry, and fish for the years 1950-75, and short-run effects are emphasized. Many studies have focused on the demand for meat. Fuller and Ladd, Hayenga and Hacklander, and Tryfos and Tryphonopoulos used linear functional forms. The log form was used in Fox and Breimyer. More recently, Chang used the Box-Cox transformation in a dynamic model to investigate aggregate demand for meat in the United States. The linear and logarithmic forms are special cases of this more general functional form. The above studies make no attempt to test restrictions implied by consumer theory. In contrast, recently, Christensen and Manser applied a translog utility system to meat demand and estimated demand parameters and tested theoretical restrictions. However, most econometric analyses of demand in agricultural economics do not use explicit utility function formulations but use arbitrary reduced forms (one recent exception is the work by Green, Hassan, and Johnson). This study adopts the latter approach because of increased ease of estimation and the ability to incorporate greater complexity in the dynamic formulation. These relations can be made locally (or, in some cases, globally) consistent with utility maximization by imposing restrictions on parameters (Court, Byron). However, homogeneity can be imposed globally as well as locally within a demand equation for many log-linear demand equations-it is noted here that Court assumed, but did not test for, homogeneity; however, Byron and others have tested for homogeneity (and usually rejected it) in more aggregated log-linear static systems. Because all demand specifications (whether a system or single equation) are amenable to homogeneity tests and because of general interest in the deflation issue, this study focuses on homogeneity restrictions.