Quantifying the Structure of Food Demand in China Using a Generalized Quadratic AIDS Specification

This manuscript is used to examine food demand structure and its dynamics for 11 commodities in urban China. The analysis is based on household-level expenditure survey data for two cross-sectional surveys of Chinese households pertaining to food expenditure patterns during 1995 and 2003. A major focus of this presentation is on the pre-committed component of demand that is not accounted for by economic and demographic characteristics. We use the generalized quadratic almost ideal demand system (GQAIDS) for its empirical superiority to the GAIDS, and estimate the associated parameters via a full information maximum likelihood procedure (FIML) procedure, where we test for whether total food expenditure for home consumption (FAH) is endogenous. We also use quality adjusted commodity unit values to account for quality differences resulting from commodity aggregation and food choice. We find that the demand for FAH by surveyed households has changed for a majority of the 11 commodities included in the analysis. We find that more than a third of vegetables consumed in 1995 were due to pre-committed demand, while no traditional Chinese food staple had positive significant pre-committed demand in 2003. With the changing food structure this may be indicative of an increased desire for flexibility in the Chinese diet