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Abstract
Many findings and policy recommendations in the academic literature are
influenced by published estimates of elasticities of demand for food. However,
the quality of these estimates is diverse and depends on modeling
choices and assumptions, including the functional form for demands, types of data
used, separability structure, food defi nitions, and statistical techniques used to estimate
the models. In this monograph, we make three contributions to the empirical literature
on demand for food in the United States. First, we evaluate the elasticities of demand
for food from previous studies using the mean absolute error in elasticity-based predictions
of quantity responses to actual past changes in prices and total expenditure.
Second, we estimate elasticities of demand for aggregate food products using annual
and monthly data under various alternative assumptions about functional form.
We evaluate how well these new estimates of elasticities of demand predict quantity
responses to actual price and expenditure changes, both absolutely and compared
with previous estimates from the literature. Third, we estimate two sets of elasticities
of demand for disaggregated fruit and vegetables: one that is conditional on the total
expenditure on fruit and vegetables and a second that is conditional on expenditure on
goods. To facilitate and provide context for these empirical contributions, we begin the
monograph with a succinct statement of the relevant theory that underpins demand
models, some specifi c discussion of separability and aggregation assumptions and
their implications for the interpretation of demand elasticities, and a review of issues
more generally that arise in empirical demand analysis.