HOUSEHOLD DEMAND IN RURAL CHINA - A 2-STAGE LES-AIDS MODEL

A complete demand system of Chinese rural households is estimated using a two-stage LES-AIDS model and pooled provincial and time-series data from 1982 to 1990. For commodity groups (food, clothing, fuel, housing, and other commodities), demand is price-inelastic. Housing and other commodities are luxury goods, while clothing and food are necessities. Within the food group, price elasticities range from -0.005 to -0.63. Expenditure elasticities are lower for grains and higher for meat, tobacco, and alcohol. The results imply a gap between food demand and supply growth. Therefore, China will face pressure to import food.