AN ALMOST IDEAL DEMAND SYSTEM (AIDS) APPLIED TO ELEVEN FRUITS IN MÉXICO (1960-1998)

Abstract

In México the fruit subsector is one of the most important economic activities in agriculture. During the period 1990-1998, fruit production accounted for 7.3 % of the national cultivated land. Despite this small percentage of land planted with fruit, trees it accounted for about 25.8 to 24.9 % of the national revenue on agricultural products, for the same period. Fruit crops in México also demand 87 millions jobs per year. This research estimated the demand elasticities for several fruit crops typical of a Mexican household (orange, banana, mango, muskmelon, apricot, watermelon, guava, paw paw, strawberry, pineapple, and grapefruit). The household’s expenditure structure and the elasticities of demand of the eleven fruits were estimated using an “Almost Ideal Demand System” (AIDS) with the seemingly unrelated regression method SUR, for both the Stone and Divisia index. Moreover, the Marshallian and Hicksian own price, crossed and expenditure elasticities, obtained with the above indexes, were very similar at their estimated point. The estimated own price coefficients classify fruits as inelastic goods. The expenditure elasticity classifies mango and banana as normal goods, and muskmelon and orange as superior goods.