Structural Change in the Retail Demand for Beef, Chicken and Pork: An Application of Gradual Switching Regression (Segmented Regression, Varying Parameters)

Abstract

This study provides support for the hypothesis that a structural change has occurred in the retail demand for beef, chicken and pork. In particular, two gradual switching regression (GSR) demand models--one which allows a permanent change in income and own-price elasticities and one which allows a permanent change in income, own-price and selected cross-price elasticities--are found to be superior to a fixed coefficient demand model. The results provide evidence of significant parameter changes beginning in early 1975. However, little may be concluded as to the permanency of the change. The structural change appears to have resulted in a more inelastic demand (with respect to both own-price and income) for each meat and an increased substitutability of chicken for beef. Of the three meats selected in the analysis, pork demand appears to be the least affected by the structural change and beef demand appears to be affected the most.