Estimating Household Price and Income Elasticities for Animal-Sourced Food: The Case of Bengkulu Province, Indonesia

Abstract

Bengkulu is one of the provinces in Indonesia where household protein consumption is still below the national protein recommended allowance. This paper examines the effect of price, income and socio-demographic factors on household demand using the Quadratic Almost Ideal Demand System (QUAIDS) model and data from the Indonesian National Socio-Economic Survey (Susenas) in March 2021, which includes 5,079 households. The QUADS parameters were estimated using the Iterated Nonlinear Seemingly Unrelated Regression technique with theoretical restrictions imposed. The estimated parameters from the model were utilized to derive price and income elasticities for animal-derived foods. Empirically, it was found that fish is the most elastic animal-sourced food with a demand elasticity of 4.44%, followed by beef (2.78%), milk (1.94%), poultry (1.54%), and eggs (0.82%). Fish substitutes for beef, chicken, and eggs when prices increase but is complementary to milk. Four animal-sourced food groups, namely fish, beef, milk, and poultry, are luxury items, with income elasticities of 2.57%, 2.39%, 2.22%, and 1.36%, respectively. In contrast, eggs were found to be a normal good with an income elasticity of 0.53%. Fish and beef are very elastic; thus, the government can use pricing strategies and implement policy to increase poultry and eggs production so that daily protein requirements of 57 grams per capita per day are reached in Bengkulu province.