DISAGGREGATED DEMAND FOR RICE IN BANGLADESH: AN ANALYSIS USING LA/AIDS MODEL

The study was conducted to examine the income and price elasticities of demand for different types of rice in Bangladesh. Both time series and cross-section data were used to estimate a complete demand system equation. The equation was estimated in three stages to obtain income and price elasticies of demand for rice. The stages were the allocation of household total income on food and non-food items, the allocation of household total food expenditure for cereal, and the allocation of household total cereal expenditure on different types of rice and wheat, respectively. The total budget for cereal food allocated to aromatic, fine, coarse rice, and wheat was 4.0%, 23.3'70, 65.2%, and 7.5%, respectively. The estimated expenditure elasticities of demand for those types of cereals Here 0.85. 0.79. 0?9, and 0.55. respectively. The expenditure elasticities of demand for aromatic and coarse rice were higher for rural households compared with urban households, while the expenditure elasticities of demand for fine rice and wheat were higher for urban households. Considering all other factors remaining unchanged, the uncompensated and compensated own-price elasticities of demand for coarse rice would fall by 7.7% with a 10% increase in its price. These falls were 7.4%, 11.170, and 4.6% for aromatic, line rice, and wheat, respectively. The estimates of uncompensated cross-price elasticities between coarse-to-fine rice showed that a 10% increase in absolute income associated with a 10% increase in real income due to fall in coarse rice price would increase the actual demand for fine rice by 4.6%. A 10% increase in absolute income accompanied by a l07 increase in real income due to fall in coarse rice price would increase the actual demand for aromatic rice and wheat by 7.4% and 4.6%, respectively