City size and household food consumptionan application of the AIDS model to food demand elasticities in Spain

Resumen

Empirical evidence on consumer behavior is of major importance in the formulation and analysis of economic policies. Changes in prices, income level, or decisions regarding taxes or other structural reforms that affect relative prices may produce very different effects depending on family income distribution or also across space. The aim of this paper is to estimate expenditure and own-price elasticities for ten aggregated food product groups using the Spanish Household Budget Survey for the year 2010. These products are the ones for which the survey provides information regarding prices and quantities, thus allowing the application of the Almost Ideal Demand System model (AIDS). This estimation procedure allows comparisons to be made not only among different levels of income, but also how relevant could be the place of residence characteristics. The results confirm that the size of the city in which the household resides has a similar significant and relevant effect on consumption patterns as family income level. This is especially clear with own-price elasticities. In Spain, large cities show a greater response to price changes than small cities or rural areas.