Is rice becoming an inferior good? Food demand in the Philippines

What are the prospects for demand for the main foodstuffs, particularly rice, in the Philippines? Countries which have traditionally consumed rice as the basic staple such as Japan, the Republic of Korea, and Taiwan are eating more wheat and wheat products. There is also a shift towards increased consumption of meats, dairy products, vegetable oils, and fruits and vegetables. A recent study found rice to be an inferior good in Japan, Taiwan, Malaysia, Singapore, Thailand, and Nepal. In this paper, the demand for cereals in the Philippines is analyzed. Instead of assuming separability, an alternative specification of the linear Almost Ideal Demand System (LA/AIDS) which includes rice, wheat, maize, meat, fish, fruits and vegetables, other foods, and non-food commodities for the Philippines is estimated using time-series data from 1961 to 1988. The effects of urbanization and dynamic factors such as habit formation in consumption are also considered in the empirical analysis. Then using the estimated parameters, the demand and income elasticities are estimated over the sample period. The parameters are used to generate baseline projections of cereal demand to 2000. Some policy implications and concluding remarks are given in the final section.Environmental Economics&Policies,Economic Theory&Research,Crops&Crop Management Systems,Food&Beverage Industry,Agricultural Research