Demand For Food Commodities By Income Groups Of Urban Residents In China

Food Consumption problems influence people's livelihood, national resident's nutrition and health standard. With the development of Sino economy, income level of urban residents in China has greatly improved, consumption level and consumption structure of urban residents has undergone great changes, so research on consumer issues is especially necessary. With the increase in income levels of residents, Food consumption structure of urban residents in China has changed greatly. Mainly in two aspects: first, share of food consumption in the total expenditure has decreased, especially in staple food consumption share; second, the consumption of subsidiary foodstuffs has increased, besides, in the whole food its share gradually increase,so dose type of food consumption, nutrition structure has has been greatly optimized. Food consumption is the cornerstone of human survival and development. it is also the needs of the most primitive of human. Changes of household food consumption structure is close relationship with the national physical fitness, also influence the governmental policy-making on various agricultural products, the implementation of agricultural subsidy schemes, agricultural resource allocation and optimization of industrial structure. With the increase of urban residents in recent years, Share of food consumption in urban residents is growing, so the research of Chinese urban household food consumption behavior is more meaningful. Income and prices are the major factor of the consumption structure of urban residents factors, Price factor is the unity of the market and government regulation. The fact that consumption patterns vary by income level means that welfare effects also vary for different when commodity prices change (Pomstrup-Andersen and caisedo, 1978). Specific demand parameters by income group can be used not only to measure accurately the welfare effects caused by given price policies but they also allow the design of compensation schemes for the poor based on design of compensation (Pinstrup-Andersen et al., 1978). Researchers often use average expenditure as a representative level of income and assume that the approximation error is small. This error, however is minimized only if the expenditure distribution and the demographic composition remain relatively constant (Deaton and Mullbauer, 1980b). These assumption generally do not hold. Conclusions based on such estimates would be erroneous and misleading. Using Engel regression equation we divided our household data into four income group. And in each group we establish a lineared almost ideal demand system adding demographic variables in order to estimate structural parameters of demand system, reaching each income group consumption and consumption structure.As the food demand consumption system problem, there are many models to research them, there are some classic models such as Engel Coefficient, Principal component analysis, Panel Data model, LES (Linear Expenditure System), ELES (Extended Linear Expenditure System), AIDS (Almost Ideal Demand System). There are many foreign researches in this area; main representatives are Deaton, Muellbauer, Blanciforti, Green et al.. But researches in this area in China are not many, mainly due to lack of data and macro-data can't explain the behavior of individual differences well. Main representatives are Sun Wenxiang, Zang Xuheng, Xinguo Dong Xinguo, Mu Yueying et al. They study Chinese people's food consumption in their way.Chinese Household Income and Comsumption Project (CHIP) of 2002 were used in our study. There are 6835 household observation for urban areas. We census every household food consumption quantity, household income, family scale, age, sex year of education, marital status and employment situation of head in household,and so on. Prices index from China Statistical Yearbook 2002 Stone price index was calculated by each family for each food price index. Through estimating Engel regression equation and test homogeneity of variances, Household data we use are distributed by following this methodology into four income group, low, medium to low, medium to high, and high. Through studying the problem of consumer attributes, consumption feature, food participation rates, the results showed the smallest percentage of high-income groups only 13.37%, but the proportion of low-income groups, is 57.32%, shows that China's wealth gap is quite big and the polarization is still serious, Through calculating the Engel coefficient we found ,high income group and medium high income group reached 30% and 33.42%,this explain high income groups have reached affluent. The Engel coefficient of low income group reaches 40%, it also have reached comfortable. Since the reform and open-up the income level and the quantity of live in Chinese urban residents have been greatly improved. Through calculating food budget share of various types of food we found meats food expenditure accounts for the largest proportion of total expenditure(35.46%~ 37.05%), but alcoholic drinks and tobacco consumption share of the budget share of the minimum(9.05%~13.11%).With the increase of income, the budget share of oil and food consumption in urban residents is increasing, the budget share of vegetable consumption and tobacco- alcohol consumption is increasing too. However with the increasing of income, the budget share of away from home consumption and poultry consumption is decrease. By calculating the participation rate of food we can see the food participate rates of variety of foods in all income groups are basically close to 1. All income groups are spending various types of food. The food expenditure in Chinese urban residents is reasonable. With the increasing of income, various types of food participation rates is growing.For four income group, we add the household characteristics and demographic factors into AIDS model to estimate structural parameters of demand equation. And we calculate the uncompensated own price elasticity, cross-price elasticity and income elasticity of various type of food. Empirical results show that the uncompensated own price elasticity, cross-price elasticity and income elasticity of grain-oil, Poultry, Vegetables, and toba-alcohol is consistent with theoretical expectations. Except consumption of away from home. With the increase in income, price elasticity of consumer products and expenditure elasticity have decreased, this results explains when food prices and household income change, the impact on low-income groups is larger than the impact on high-income groups, as incomes increase, the price elasticity and expenditure elasticity of food expenditure away from home increases that explains when food prices and household income change, the impact on high-income groups is larger than the impact on low-income groups. By analyzing the various types of elasticity we find the basic necessities food of urban residents as grain and vegetable consumption category are the lack of elasticity. The elasticity of poultry, toba-alcohol and expenditure of away from home is richer. Therefore, at the same time government efforts to increase income of urban residents, the necessities of life through lower taxes on food commodity prices and other measures to provide protection to improve the consumption necessities of urban residents. However, alcoholic drinks and tobacco consumption should increase taxation fiscal policy to curb their consumption. So urban residents can lead rational, reasonable and consumption of healthy nutrition.life.By way of empirical analysis, policy recommendations is increasing the income level of residents, expanding domestic demand, stabling level of price. Vigorously promote scientific and reasonable diet to optimize of food consumption structure of residents. To ensure basic food and oil, at the same time, we should further enhance the consumption of vegetables and fruits. We should fellow the road of diversify, scientific rationalization, nutrition and health. Gradually adapting to our country a scientific and reasonable diet to improve quality of life in Chinese urban residents.