Analysis of Saudi demand for imported honey using an Almost Ideal Demand System (AIDS)

Outline

• Abstract
• Keywords
• 1. Introduction
• 2. Research Methodology
• 2.1. Empirical Aids Model
• 2.2. Demand Function Constraints
• 2.3. Demand Elasticities
• 2.4. Parameters Estimations
• 2.5. Data
• 3. Results and Discussion
• 4. Conclusion
• Acknowledgement
• Appendix A.
• References

Conclusions

This study aims to analyze Saudi demand for natural honey imported from Yemen, Pakistan, Australia, Argentina, Mexico, and Germany, which contribute around 73.7% of the value of natural honey imports during the period of study (1991–2017). Marshallian elasticities estimation using AIDS model shows all own-price elasticities were negative and significant except for own-price elasticity associated with demand for natural honey imported from Pakistan. Natural honey imported from Yemen has own-price inelastic demand. In addition, the results of cross-price elasticities indicate that natural honey imported from Yemen has a substitutability relationship with that imported from Australia, whereas the demand for natural honey imported from Yemen is inelastic to changes in the price of that imported from Australia. The natural honey imported from Australia has a statistically significant substitutability relationship with that imported from Yemen, Mexico, and Germany, and natural honey imported from Germany has a statistically significant substitutability relationship with that imported from Australia. The estimated values of expenditure elasticities indicate that demand for imports from Yemen, Argentina, and Mexico is elastic to expenditure on natural honey imports, while the natural honey imported from Pakistan and Germany is inelastic to expenditure on imports. According to these study results, it is important to encourage the domestic production of honey to meet the increase in the demand of the natural honey. The future studies could examine whether the domestic natural honey might be close substitute of any of these imported natural honey. In addition, we recommend increasing sources of import natural honey, especially if a country might be closer substitute for others such natural honey of India could be close substitute to natural honey of Pakistan.