An error correction almost ideal demand system for meat in Greece

Abstract

This paper represents a dynamic specification of the Almost Ideal Demand System (AIDS) based on recent developments on cointegration techniques and error correction models. Based on Greek meat consumption data over the period 1958–1993, it was found that the proposed formulation performs well on both theoretical and statistical grounds, as the theoretical properties of homogeneity and symmetry are supported by the data and the LeChatelier principle holds. Regardless of the time horizon, beef and chicken may be considered as luxuries while mutton‐lamb and pork as necessities. In the short‐run, beef was found to have price elastic demand, pork an almost unitary elasticity, whereas mutton‐lamb, chicken and sausages had inelastic demands; in the long‐run, beef, and pork were found to have a demand elasticity greater than one, whereas mutton‐lamb, chicken, and sausages still had inelastic demands. All meat items are found to be substitutes to each other except chicken and mutton‐lamb, and pork and chicken.