Quadratic Almost Ideal Demand System

In this study, the effect of socioeconomic variables on provincial bread demand using the QUAIDS model has been investigated. In this model, socioeconomic variables such as age, gender and marital status of the head of household, the education level of the head of household and spouse’s head of household, household size, and occupation status of the head household have been used. The virtual variable of the target law of subsidies is also used to study the effects of this policy. To this end, the quadratic almost ideal demand system was applied. This model has been estimated using the consolidated data and Iterated Linear Least Squares Estimator and the information of more than 165,000 urban households in Iran for the years 1386-1394 and for different provinces. The results of the research show that during the studied years, bread is an essential good for all provinces except in Isfahan, Chaharmahal o Bakhtyari, and Kohgilouye. The compensated and uncompensated price elasticities of bread for all provinces are negative and less than one, so the bread is an inelastic good for all provinces. Also, the coefficients related to household size, gender, and marital status of the head of household and the target law of subsidies are positive and significant.

Abstract Household equivalent scale is an index to measure the impact of household demographic characteristics, such as the householder’s age and gender, the number of household members, etc., and plays a significant role in measuring poverty and inequality. By taking into account demographic characteristics differences, this index facilitates the reasonable comparison of households’ welfare, and functions as a coefficient for the target household in relation to the reference household. Using income and expenditures data of Iranian urban household in the period of 2012-2018, this study measures the relative child cost of each urban household in Iran while estimating the Quadratic Almost Ideal Demand System (QAIDS) and price scaling by means of Nonlinear Seemingly Unrelated Regression. Also, it calculates the elasticity of income and price of electric power goods. The results illustrate that the relative child cost in Iranian urban households is 33% of an adult cost, and electric power goods in Iranian urban households is a necessary yet low elasticity commodity. Therefore, pricing policies may not significantly influence demand for this product.