Is Animal-Protein-Food Consumption Still Sensitive to Price Change?Empirical Evidence from D.I. Yogyakarta Province, Indonesia - repository civitas UGM

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IACSS-232

Is Animal-Protein-Food Consumption Still Sensitive to Price Change?

Empirical Evidence from D.I. Yogyakarta Province, Indonesia

Mujtahidah Anggriani Ummul Muzayyanah

a*

, Eko Priyotomo

b

a

Faculty of Animal Science, Universitas Gadjah Mada, Indonesia.

b

Researcher on Agricultural Economics, Indonesia.

*Corresponding Author: m_anggriani_um@ugm.ac.id

ABSTRACT

Consumption of animal protein in Indonesia is dominated by livestock products food. Among

livestock products, beef, chicken and egg are the main animal-protein food in Indonesia. This

study examines the affecting of household`s factors in the consumption of beef, chicken, and

egg and the expenditure and quantity analysis of these foods. Household expenditure data in

urban and rural area of D.I Yogyakarta Province (here after DIY Province) are used in this

study with Engel's theory as basic method. The empirical results show that total expenditure,

as proxy of income, and regional factors have significant effect to expenditure and demand of

beef, chicken, and egg, while gender of household head was found to have no significant

impact on the expenditure and quantity of these foods, and as household-size increases, the

expenditure and quantity of chicken, and egg consumed increased. Urban household spend

less in chicken and egg, and spend more on beef relative to household in rural. Compare to

urban household, rural household was more elastic on beef and chicken consumption based

on income and quantity elasticity. Increasing income will be more effective way than

decreasing its price to achieve substantial improvements and enhance animal protein

consumption.

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360

1. Introduction

Indonesian animal protein food consumption is dominated by livestock products such as meat,

egg and milk. Some reference noted that poultry meat, beef and egg are consumer

preferences of animal protein consumption (Bond et al, 2007; INSTATE, 2004). Chicken in

particular is the meat of choice. DGLS (2007) reported that during 2004-2006, chicken meat

is the highest consumption among meat product consumption of Indonesian people (about

3.81 kg/cap/year from 4.8 kg/cap/year of the total fresh meat consumption), and chicken egg

is also highest among egg products (about 90 percent from total egg product). It is indicate

that chicken and egg consumption is main source of animal protein source which have cheap

price and people keep consuming chicken meat and egg.

Livestock products, as high-value-food, in developing country like Indonesia have generally

higher responsiveness than do cereals. These foods are responsive to the change of price and

or income.

Sunarto (2000), for instance, presents animal protein consumption analysis in West Java,

Indonesia, that is change in prices of fish and egg effects to the food consumption since these

two items high price elasticity. Hutasuhut, et.al (2002) estimated meat consumption

parameters. Consumers more adapt their consumption pattern to chicken price changes than

they will for beef price changes.

Residential locations also appear to be an important determinant of livestock product food

consumption. Olivia and Gibson (2003) found that demand for beef is more elastic in price

than is the demand for chicken, except in urban Java. Opposite to the beef consumption

pattern, the demand for chicken in urban Java is more own-price elastic than it is in rural Java.

This could be due to many rural households in Java raising chicken for their own

consumption.

The objective of the study is divided into two folds; first, to examine the determinants of

household demand for main animal protein such as beef, chicken, and egg and second, to

estimate food expenditure and quantity elasticity of demand for beef, chicken, and egg.

2. Material and Methods

This research is using household expenditure data. Household Expenditure Survey

(SUSENAS) data were used in this study. The 2011 SUSENAS survey was conducted by

Central Bureau of Statistics (CBS) which is involved by sample households in Indonesia. In

this study, we used raw household data record from Household expenditure data in urban and

rural area of D.I Yogyakarta Province (here after DIY Province). The analyses of household

food consumption depend on economic and non- economic factor of the households.

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361

chicken, and egg consumption. The expenditure and quantity approach in this study used

Deaton (1988) and Deaton (1997) such as

e

j

=

f

(x

,z

) and

q

j

=

f (x,z)

have always assume a

log-linear function.

The Engel relationship as

∑

…. (1)

∑

….. (2)

where

e

ij

and

q

ij

are respectively, expenditure on the

j-th

food items (

j-th food = beef, chicken

and egg

) and quantity of

j-th

food item purchased by the

i-th

household;

z

ik

is a set of

household‘s

socio-economic variables which includes household size, age and gender of the

household head,

D

is dummy variable which capture location effect on

e

ij

and

q

ij

(

D

=1

denotes households in urban; 0 denotes households in rural);

θ

j

,

β

j

, and

τ

are parameters to

be estimated;

and

are disturbance term.

The adding up criterion of Almost Ideal Demand System (AIDS) model (Deaton and

Muellbauer, 1980), does not satisfy in equations 1 and 2. But in this case, this is not a serious

concern since we did not estimate a complete demand system.

Because of non-linear specification of equation 1, the expenditure - income elasticity of the

j-th

food item for the

i-th

household

θ

ij

is calculated using the relationship below:

̅

……….. (3)

Also, the quantity-income elasticity of the

j-th

food item for the

i-th

household

η

ij

is

calculated using the relationship below

̅

………. (4)

where (

log x

i

)is the mean of the logarithm of income

x

i

for the households.

3. Result and Discussion

Expenditure and quantity equations estimated based on equations 1 and 2, respectively for the

pooled estimate, is Presented in Table 1. The coefficient of log_total_exp are positive and

statistically significant for all the equations while (log_total_exp)2 are negative and

statistically significant for all equation. As earlier mentioned, inclusion of (log_total_exp)

2

is

a test for non-linearity between the dependent variables and total expenditure. The significant

of the coefficient shows that non-linearity exist between the demand for beef, chicken and

egg and total expenditure in the study area.

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362

that the older household head spend and demand more of egg in the study area. The variable

GENDER was found to have no significant impact on the expenditure and quantity across all

equations. The estimated coefficient of dummy region indicates that households in urban

spend less on chicken and egg relative to households in rural area. Households in urban spend

more on beef relative to households in rural.

Table 1: Estimated expenditure and quantity equations (pooled estimates)

Expenditure estimation

Quantity estimation

beef

chicken

egg

beef

chicken

egg

Note: , and significant at 0.01, 0.05 and 0.1 level of significance respectively

The estimation result of expenditure and quantity demanded elasticity is presented in Table 2.

The result showed that rural household was more elastic on beef and chicken consumption

based on income and quantity elasticity than that of urban household. The magnitude of

income parameter was bigger than that of price for all food items.

Table 2. Point estimates of the expenditure and quantity elasticities.

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4. Conclusion

Total expenditure, as proxy of income, and regional factors have significant effect to

expenditure and demand of beef, chicken, and egg, while gender of household head was

found to have no significant impact on the expenditure and quantity of these foods. Urban

household spend less in chicken and egg than that of beef. Urban household spend more on

beef relative to household in rural, and as household-size increases, the expenditure and

quantity of chicken, and egg consumed increased. The elasticity result shows that change of

income is more responsive to the consumption of beef, chicken and egg than change of price

of these food items. Changes in price of the food items have less of an impact on its demand.

This study is implying that income policies will be the most effective way to achieve

substantial improvements in animal protein consumption.

REFERENCES

[1]

Bond R, Gil Rodriguez and Jammie Penm, Agriculture in Indonesia: Review of

Consumption, Production, Imports and Import Regulations,

ABARE Conference Paper

07.6, 13th Meeting of the Australia

–

Indonesia Working Group on Agriculture,

Food and

Forestry Cooperation (WGAFFC), Gold Coast, Queensland, 28

–

31, 2007.

[2]

Deaton, A. and Muellbauer, J., 1980. An Almost Ideal Demand System,

American

Economic Review

, 70, 312

–

325. [3]

Deaton, A. 1988. Quality, Quantity, and Spatial Variation of Price,

The American

Economic Review

, 78(3), 418-430.

[4]

Deaton, A. 1997. The Analysis of Household Surveys: A Micro Econometric Approach

to Development Policy. Baltimore USA: John Hopkins University Press.

[5]

DGLS (Directorate General of Livestock Services), 2007, Livestock Statistical Book,

Jakarta, Directorate General of Livestock Services.

[6]

Hutasuhut, M., Chang, H.S., Grifith, G., Donnel, C and Doran, H., 2002. The Demand

for Beef in Indonesia: Implication for Australian Agribusiness,

Agribusiness Review,

10 (4).

[7]

INSTATE, (2004).

Food Exporters‘s guide to Indonesia,

Handbook

, Department of

Agirculture,

Fisheries

and

Forestry,

Australian

Government.

http://www.daff.gov.au/__data/assets/pdf_file/0006/183561/indonesian_exporters_hbfin

al.pdf [Retrived January 2014].

[8]

Olivia, S and Gibson, J., Unit Value Biases in Meat Demand in Indonesia,

Contributed

Paper presented to the 47th Annual Conference Of the Australian Agricultural and

Resource Economics Society,

Fremantle, February 12-14, 2003.

[9]

Sunarto, I., 2000. Consumption of Animal Protein Consumption in West Java (

Analisis

Konsumsi Rumah Tangga Untuk Komditi Pangan Protein Hewani di Propinsi Jawa

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