A Two‐Stage Rural Household Demand Analysis: Microdata Evidence from Jiangsu Province, China

In this paper we evaluate economic and demographic effects on China's rural household demand for nine food commodities: vegetables, pork, beef and lamb, poultry, eggs, fish, sugar, fruit, and grain; and five nonfood commodity groups: clothing, fuel, stimulants, housing, and durables. A two‐stage budgeting allocation procedure is used to obtain an empirically tractable amalgamative demand system for food commodities which combine an upper‐level AIDS model and a lower‐level GLES as a modeling framework. The results indicate that the slow growth of food consumption in China during the latter half of the 1980s is a result of income stagnation rather than consumption saturation. Growth in the demand for better food and shelter by Chinese rural households will continue to be a major concern.