Observed Demand Function of the Meat Market in Colombia 2000 – 2007: Comparative Results Analysis of Several Econometric Models

Abstract

In this article, we apply various econometric methods to estimate the demand function observed in the three main meat markets in Colombia (beef, pork and poultry). To construct these functions, price indexes were considered as independent variables (p1, p2, p3, p4, p5,) and Household Consumption (HC) as a proxy for a wealth variable. With this information, the Marshallian demand functions are built for type Xi = f (p1, p2, p3, p4, p5, HC), which can help develop simple demand models and systems of equations. By verifying the assumptions made in accordance with the R2 statistics, Durbin-Watson and economic theories, conclusions point out that the model with the Linear Approximation to Almost Ideal Demand System (AL-AIDS) meets the expected statistical and economic theory outcomes, becoming the best alternative to show the behavior of the meat market in Colombia. Based on the AIDS model results, these goods can be classified as normal goods as well. Finally, to calculate the different elasticities during the analysis period (2000-2007) for each meat market in question, substitution and complementarity relations between the goods studied and the income elasticity based on HC were identified.