The Demand for Food Quality in Rural China

Manystudies of food demand do not use actual prices but unit values, obtained by dividing expendituresby the quantity consumed. This can bias empirical analyses because unit values are not exogenousmarket prices; they reflect household food quality choices within each food category. This articledevelops a framework for assessing the resulting bias in income and price elasticities of demand andapplies the framework to data for rural China. Empirical results indicate that households in ruralChina tend to consume higher-quality food as income increases, with a greater sensitivity to incomefor basic foods than for luxury foods.