Another view of impact of BSE crisis in Japanese meat market through the almost ideal demand system model with Markov switching

Abstract

During this study period, there have been serious food safety concerns regarding Bovine Spongiform Encephalopathy (henceforth BSE) and bird flu in Japan. Previous studies such as Peterson and Chen (2005) and Ishida et al. (2010) assumed that structural change points in demands were already known and they specified transition functions at the change points. On the other hand, we detected the structural change points without any prior information about change points. To assess the structural change points in the Japanese meat market, we employed the Markov-Switching Almost Ideal Demand System (MS-AIDS) model (Allais and Nichèle, 2007). In this study, we found the structural change point coinciding with the timing of the first reported case of BSE, but not of bird flu.

Keywords:

• Bovine Spongiform Encephalopathy
• bird flu
• meat products
• Markov switching
• almost ideal demand system

JEL Classification:

• Q11
• C51
• D12

View correction statement:

Corrigendum

Notes

¹ The parameters in Equations 1(1) and 2(2) have the theoretical constraints as follows:

‘Adding up’ guarantees that the total expenditure is equal to the sum of expenditures on the category of products under consideration. ‘Homogeneity’ guarantees that if prices of products increase to for a scalar , representative consumer has to increase his or her expenditure from to to keep his or her utility level. ‘Symmetry’ guarantees that the substitution effect in the Slutsky equation is symmetric.