Factors affecting the demand for meat in New Zealand

Abstract

Since the late 1970s, New Zealand red meat consumption has declined considerably whereas white meat consumption has gradually increased. The purpose of this research is to determine whether there has been a structural change in the domestic demand for meat in New Zealand. A parametric approach was used as it allows for the estimation of price and expenditure elasticities. The first-differenced form of the Linear Approximate Almost Ideal Demand System (LA/AIDS) model was estimated, using quarterly New Zealand data for the period 1985-2000 on meat consumption, prices and real total expenditure.

The null hypothesis of no gradual shift in the share of each type of meat was tested using a time trend. Although the sign on the coefficients of the time trend in each equation conformed with a priori expectations, they were not statistically significant. These results suggest that the empirically observed changes in the pattern of meat consumption in New Zealand can be explained by changes in relative prices and expenditure. Both Marshallian and Hicksian price and expenditure elasticities were estimated. The estimated Marshallian elasticities suggested that the demand for beef and veal is price elastic whereas the demand for poultry is price inelastic. They also suggested that the demand for lamb and mutton is price unitary. Beef and veal, and lamb and mutton were determined to be luxuries whereas pig meat is a necessity. The estimated Marshallian expenditure elasticity for poultry had an unexpected negative sign but was not statistically significant. The Marshallian cross-price elasticities revealed a complementary relationship among many of the meats, which contrasted with a priori expectations. Results for the estimated Hicksian elasticities were largely consistent with the Marshallian elasticities. Compared to the Marshallian elasticities, the Hicksian own-price elasticities are smaller in magnitude. In addition, the Hicksian cross-price elasticities indicate a higher degree of substitution than the Marshallian cross-price elasticities.