WORLD FOOD DEMAND

Long-term projections of global food demand are heavily dependent on which functional form of the food demand equation is used. Given that real incomes can change substantially over the long-term, key elements are the dependence of the income elasticity on income, which ensures that the food budget share always lies within the [0, 1] range, and the role of income inequality. This article analyzes these issues, proposes a new functional form that deals with them, and presents estimates of income and price elasticities for food in 138 countries. Key words: cross-country demand, Engel’s law, food demand, functional form of demand equations. JEL Codes: D11, D12, Q11. There are great disparities in food consump-tion patterns across countries. For example, the poorest countries devote more than one-half of total consumption to food, while in the most affluent countries this commodity comprises less than 10%. The dominant economic dif-ference among countries is that incomes vary substantially; the ratio of income per capita in the richest country to that in the poorest is on the order of 100. For example, according to recently-published data from the Interna-tional Comparison Program (ICP)1, in 2005 consumption per capita for the United States is more than $30,000 (international dollars), while the corresponding value for the Demo-cratic Republic of Congo is only about $132. In these cross-country data, we clearly observe that the more affluent have smaller food bud-get shares, which is evidence of Engel’s law. Since the food budget share declines as income increases, the income elasticity is less than one. The question is, how should this elas-ticity vary with income? Prior research in bot