A nutritional goods and a complete consumer demand system estimation for South Africa using actual price data

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Authors

Van Oordt, Marius Louis

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University of Pretoria, Department of Economics

Abstract

Empirical analysis of South African indirect tax policy reform and the welfare consequences of such reform has been limited by a lack of reliable consumer demand system estimations. One reason for potentially unreliable demand estimations is not using actual price data in estimation. In this paper, the results of a nutritional goods demand system estimation and a complete demand system estimation are reported. Both systems were estimated with the use of the quadratic almost ideal demand system (QUAIDS) model incorporating demographic variables and using actual price and expenditure data. Subsequent to estimations, expenditure, own and cross-price elasticities of demand were calculated for both demand systems. The coefficients estimated provided largely statistical significant results and all elasticities calculated seem plausible in sign and magnitude.

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Keywords

Indirect tax, Elasticities, South African indirect tax policy reform, Welfare consequences, Quadratic almost ideal demand system (QUAIDS), Demand system estimation, Nutritional goods

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Citation

Van Oordt, ML 2016, 'A nutritional goods and a complete consumer demand system estimation for South Africa using actual price data', South African Journal of Economic and Management Sciences, vol. 19, no. 4, pp. 615-629.