An Analysis of Canadian Aggregate Demand for Food at Home and Away from Home
Authors: Goddard Dean 
Published: July 2010

Estimates of the elasticities of consumer demand for food at home, meals in restaurants and other non‐food consumption for Canada were made by applying the Linear Expenditure System (LES) and the Almost Ideal Demand System (AIDS) to time series data for the period 1949 lo 1981. The parameterized demand systems were used to analyze shifts in aggregate Canadian food consumption patterns and to predict future food demand levels lo the year 1987 under various food price scénarios. An informal comparison of the performance of the two indicated the relative desirability of the AIDS for future investigations of food demand in Canada.

Des estimations sur les élasticitiés de la demande alimenlaire du consommateur au Canada, tant au foyer qu'au restaurant, ainsi que pour la consommation autre qu'alimentaire, ont été realisées par la mise en pratique du Systéme de Dépense Linéare (SDL) el du Systéme de Demande Presque Idéal (SDPI) sur des données temporelles successives s'échelonnant de 1949 à 1981. Les systémes de demande dont les paramètres ont été eslimes, onl été utilises afin ďanalyser les variations sur ľensemble des modéles de la consommation alimenlaire canadienne, ainsi que pour predire les échelons de la demande alimenlaire jusqu'en 1987, selon differenls scénarios de prix. Une comparaison informelle de la performance des deux systèmes a indiqué que ľutilisation du SDPI etait preferable pour les etudes futures concernant la demande alimenlaire au Canada.

In conclusion, first estimates of the structure of Canadian consumer demand for food at home, food away from home and non‐food aggregate commodities have been provided, and these estimates have been used to calculate elasticities with respect to disposable income, total consumer expenditure, own price and cross prices. The results indicate that Canadian consumer demand for meals away from home is both more income‐elastic and price‐elastic than the demand for food at home. A test of the theoretical hypotheses of homogeneity and symmetry of aggregate demand was conducted and indicates that homogeneity is decisively rejected, while symmetry as an additional restriction is not rejected at the 0.5 percent level.

It was found that imposition of homogeneity caused an increase in serial correlation of the error terms, thus indicating the desirability of applying a more dynamic model which allows for habit formation and perhaps uses permanent rather than current income as an explanatory variable.

Two examples of possible policy application of the results have been provided: an analysis of the causes of shifting expenditure patterns for food at home and meals in restaurants; and a medium‐term forecast of the expenditure levels and shares for food at home, meals outside the home, and non‐food items for the years 1982 to 1987. The sensitivity of these forecasts to potential increases in food prices was also examined.

An informal comparison of the two models estimated suggests that the LES provided a slightly better fit to the data. However, its results are subject to more limitations than the AIDS, as was noted in the discussion of models. Because of the greater sensitivity of the AIDS to the data, its use in research designed to investigate the structure of demand is likely to prove more fruitful than the use of the LES.