There is renewed interest in robust estimates of food demand elasticities at a disaggregated level not only to analyse the impact of changing food preferences on the agricultural sector, but also to establish the likely impact of pricing incentives on households. Using data drawn from two national Household Expenditure Surveys covering the periods 1998/1999 and 2003/2004, and adopting an Almost Ideal Demand System approach that addresses the zero observations problem, this paper estimates a food demand system for 15 food categories for Australia. The categories cover the standard food items that Australian households demand routinely. Own‐price, cross‐price and expenditure elasticity estimates of the Marshallian and Hicksian types have been derived for all categories. The parameter estimates obtained in this study represent the first integrated set of food demand elasticities based on a highly disaggregated food demand system for Australia, and all accord with economic intuition.
A preliminary analysis of demand in eight major OECD wool‐consuming countries is used to provide up‐to‐date estimates of price elasticities of demand for wool. Those elasticities are employed to calculate ex ante market prices, assuming no wool price stabilisation in Australia. The computed ex ante prices are used in a dynamic simulation to estimate demand and, hence, revenue from wool sales to the eight countries in the absence of reserve price operations in Australia. Based on the preferred semi‐log demand curve, the variability of wool prices is estimated to have been reduced by 44 per cent, due to Australian intervention in the market up to 1977/78. However, price stabilisation is estimated to have lowered the revenue from Australian wool sales to the eight countries by S139m, or by 2 per cent, in the period up to 1977/78.
In July 1993 the Wool Industry Review (Garnaut) Committee presented its recommendations on disposal of the wool stockpile, on wool marketing, and on organizational arrangements in the wool industry. This paper focuses on the Report's treatment of two issues central to the future economic benefits to Australia from wool: the approach to the industry's stockpile‐related debt, and disposal of the stockpile. There are strong grounds for thinking that the Garnaut Committee's recommendations on these issues– accepted by the government–are contrary to the best interests of the wool industry and Australia.
Richardson (1982) makes three direct criticisms of the paper dealing with hidden revenue effects of wool price stabilisation (Campbell et al. 1980). These criticisms relate, first, to a difference between the definition of hidden revenue and that advanced by Gruen (1964); second, to the basis of the choice of preferred functional form; and third, to a failure to consider the implications of the potential throughput destabilising impacts of price stabilisation. In discussing these points, Richardson's arguments that the conclusions were overstated and that there is a need t o reinterpret the results are considered, along with his suggestions that the results d o not provide a sound basis for policy decisions and that there is a need to focus on the state of knowledge concerning risk effects.Arising from these specific points, Richardson seems to be concerned that the results should not be misinterpreted as measuring hidden revenue impacts incurred directly by growers.
Measure of RevenueIt is true that hidden effects were measured on gross sales revenues and, therefore, that the revenue definition differs from that used by Gruen. Consequently, we share Richardson's concern that the results should not be used as a direct measure of hidden transfers incurred directly by growers. This point was communicated to Watson and he refers to 'sales revenue' and not growers' revenues (Watson 1980, p. 90).
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