STATISTICAL ANALYSIS OF FOOD EXPENDITURE BEHAVIOR OF AN NGO SUPPORTED FARMERS’ FAMILIES IN DINAJPUR: AN APPLICATION OF LA/AIDS MODEL

Abstract

This study analyzed aggregate food expenditure data of marginal and small farmers` families’ collected from the Dinajpur District in the north-western Bangladesh. The Linear Approximate Almost Ideal Demand System (LA/AIDS) method is used to estimate food expenditure and demand function for aggregating the seven food categories. In order to observe the impact of per capita monthly food expenditure, prices of different commodities, household size, dependency ratio, sex, age, food security status and occupation of the household head on the budget share. The study was based on among the NGO beneficiaries program LRP-45 (ActionAid Bangladesh), Ghorgahat and Katabari union in dinajpur District. The food demand and expenditure behavior analysed by sample of size of 165 household was drawn from the enumerated household of 4936 employing simple random sampling method. The AIDS model fits better for all the items as the adjusted R2 values under consideration the regression through-the -origin model as a solution to the problem of Heteroscedasticity. The results revealed that, the allocation of household total monthly expenditure on food items. The mean budget share for Cereals, Roots and Pulses, Vegetables, Rich foods, Milk & Sugar, Oil & Spices and Drugs & Other Luxuries was (52%, 9.5%, 14.6%, 3.0%, 6.8%, 5.8%, & 7.7%) respectively. The empirical findings of the estimated seven expenditure equations are summarized. The expenditure elasticities for food groups are elastic, except cereals, vegetables, and oil & spices. The implication is that food groups of cereals, vegetables, and spices are necessities in the Bangladeshi diet. Roots & pulses, rich foods, milk & sugar, and luxuries foods are luxury goods. Marshallian and Hicksian elasticity calculated from the model were between 1 and -1 making the products less responsive to price changes. The uncompensated own-price elasticties for the food items for cereals (-0.43), vegetables (-1.07), milk & sugar (-0.67), oil & spices (0.83) and luxuries (-1.04) were inelastic, showing that consumers were not sensitive to the price in adjusting their consumption of corresponding items. However, for vegetables, roots & pulses, own-price elasticity of demand were close to one (0.68) implying that quantity demanded for this item changes by almost the same percentage with the price change. That is, if the prices of these food items decreased, then the demand for those food increased. For example, if price of rich foods falls by 10 percent, then demand for rich foods would increase by 19.6 percent. Compensated own and cross-price elasriceties of demand for oil & spices, and rich foods in this case were substitutes.