One distinct change in Malaysians’ food consumption behavior has been the preference towards meat products. The entire agri-food industry is impacted by changes in food consumption behaviors. This study attempts to provide a better understanding of meat consumption behaviors, by estimating income and price elasticities in Malaysia. Expenditure and price elasticities are estimated by Linear Approximate Almost Ideal Demand System (LA/AIDS) model in the first stage, followed by estimation of Engel function in the second stage in order to obtain the estimates of income elasticities for the meat products using Household Expenditure Survey 2004/05 data. The estimated positive and inelastic income elasticities indicate that all meat products are normal and necessity goods, except other meats. The estimates of the own-price elasticities of demand for all the meat products are greater than unity. This study shows that there would be increasing demand for major meat products among Malaysians in the future.Meat, Linear Approximate Almost Ideal Demand System model, Demand elasticity

Abdullah, Amin Mahir

Mohamed, Zainalabidin

Radam, Alias

Shamsudin, Mad Nasir

Tey, (John) Yeong-Sheng

English

Research Papers in Economics

DEMAND FOR MEAT PRODUCTS IN MALAYSIA 
by 
 
Tey (John) Yeong-Sheng*
1, Mad Nasir Shamsudin
2, Zainalabidin Mohamed
3, Amin 
Mahir Abdullah
1, and Alias Radam
1 
 
 
ABSTRACT 
 
One distinct change in Malaysians’ food consumption behavior has been the   preference 
towards meat products. The entire agri-food  industry  is  impacted by changes  in  food 
consumption behaviors. This study attempts to provide a better understanding of meat 
consumption  behaviors,  by  estimating  income  and  price  elasticities  in  Malaysia. 
Expenditure  and  price  elasticities  are  estimated  by  Linear  Approximate  Almost  Ideal 
Demand System (LA/AIDS) model in the first stage, followed by estimation of Engel 
function in the second stage in order to obtain the estimates of income elasticities for the 
meat products using Household Expenditure Survey 2004/05 data. The estimated positive 
and inelastic income elasticities indicate that all meat products are normal and necessity 
goods, except other meats. The estimates of the own-price elasticities of demand for all 
the meat products are greater than unity. This study shows that there would be increasing 
demand for major meat products among Malaysians in the future. 
 
 
Keywords:  Meat,  Linear  Approximate  Almost  Ideal  Demand  System  model,  Demand 
elasticity 
 
JEL code: D12 
 
 
1.0  INTRODUCTION 
 
One distinct change in Malaysians’ food consumption behavior has been the preference 
towards meat products. As the per capita income increases, Malaysians are consuming 
more meats than staple and grain foods. Chern et al. (2003) suggested that since there is a 
limit on total calorie intake, the ratio of the meat products in food basket becomes larger 
in  comparison  to  other  grain  commodities.  Hence,  meat  consumption  is  increasingly 
important in Malaysians’ diet. This is mainly attributed to the government subsidies and 
ceiling  price  control  that  have  made  poultry  affordable  and  the  most  important 
homogeneous meat among Malaysians.  
 
                                                 
1 Institute of Agricultural and Food Policy Studies, Universiti Putra Malaysia, Malaysia.  
* Corresponding author: tyeong.sheng@gmail.com 
2 Faculty of Environmental Studies, Universiti Putra Malaysia, Malaysia. 
3 Department of Agribusiness and Information System, Faculty of Agruculture, Universiti Putra Malaysia, 
Malaysia. The entire agri-food industry is impacted by changes in food consumption behaviors. The 
main purpose of this meat demand analysis is to analyze meat consumption behaviors in 
Malaysia. To be more specific, this study attempts to provide a better understanding of 
meat consumption behaviors, by estimating  income and price elasticities  in  Malaysia. 
These  meat  products  comprise  of  beef,  pork,  poultry,  mutton,  and  other  meats.  It  is 
important to take note that fish is not included in this demand analysis. This is because 
there are many heterogeneous groups for fish.  
 
2.0  STYLIZED FACTS  
 
There are two main characteristics of meat consumption in Malaysia over the last four 
decades. One is the increasing trend of poultry and meat consumption, and the other is 
the  increasing  dependence  on  imports  for  beef  and  mutton  to  fulfill  domestic 
consumption, which implies lower self-sufficiency levels in these meats.  
 
Figure  1  presents  annual  per  capita  beef,  pork,  poultry,  and  mutton  consumption  in 
Malaysia, 1960-2005. From the figure, per capita consumption of poultry had increased 
steadily since 1960 and reached the peak in 1990s. On average, the consumption of beef 
had been increasing steadily over the last forty years while the consumption of mutton 
had been considerably low compared to poultry, pork, and beef. In 1960, the per capita 
consumption of poultry, pork, beef, and mutton were 3.46kg, 14.43kg, 1.56kg and 2.25kg 
respectively. Recent observation recorded the per capita consumption of poultry, pork, 
beef, and mutton were 34.3kg, 7.67kg, 5.5kg and 0.75kg respectively in 2005. 
 
FIGURE 1: Annual per capita consumption of meats in Malaysia, 1960-2005 
0
5
10
15
20
25
30
35
40
Year
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
k
g
/
y
e
a
r
Beef Mutton Pork Poultry
 
Source: Food and Agriculture Organization of the United Nations, 2007. 
 
Figure  2  presents  annual  self-sufficiency  levels  of  beef,  pork,  poultry,  and  mutton  in 
Malaysia, 1960-2005. Though the beef and mutton production had been growing steadily 
but the self-sufficiency levels of beef and mutton had decreased drastically from 82.5% 
and 37.9% in 1960 to 21.49% and 8.15% in 2000 respectively. The low self-sufficiency 
levels imply that Malaysia is increasingly dependence on the imports for beef and mutton 
to fulfill domestic demand. On another hand, Malaysia had always been self-sufficient in poultry and pork. Self-sufficiency level of poultry had increased remarkably from 56.4% 
in 1960 to 104.31% in 2005.  
 
FIGURE 2: Annual self-sufficiency levels of meats in Malaysia, 1960-2005 
0
20
40
60
80
100
120
140
160
Year
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Year
S
e
l
f
-
s
u
f
f
i
c
i
e
n
c
y
 
l
e
v
e
l
 
(
%
)
Beef Mutton Pork Poultry
 
 
3.0  LITERATURE REVIEW 
 
Baharumshah  and  Mohamed  (1993),  Nik  Mustapha  et  al.  (1994)  employed  Linear 
Approximate Almost Ideal Demand System (LA/AIDS), a linear form of Almost Ideal 
Demand System (AIDS) in the meat demand analyses in Malaysia. This is mainly due to 
the difficulty to estimate the original non-linear form of the AIDS model developed by 
Deaton and Muellbauer (1980).  
 
In Baharumshah and Mohamed (1993), the estimated expenditure elasticities for poultry, 
pork,  beef,  and  mutton  are  1.432,  1.152,  0.906,  and  1.117  respectively;  own-price 
elasticities are -3.736, -0.593, -0.873, and -0.420 respectively. The study indicated that 
Malaysian consumers were expected to increase their demand for all types of meat, where 
the demand for poultry was more likely to grow faster than other types of meat.  
 
However, empirical previous studies (Buse, 1994; Hahn, 1994; Alston et al., 1994; Asche 
and  Wessells,  1997;  Moschini,  1995)  found  that  the  LA/AIDS  model  has  difficulty 
capturing the effects of non-linear Engel curves. Similarly, demand elasticities yield from 
the LA/AIDS model are mostly overestimated. In order to maintain the simple estimation 
procedure of  the  LA/AIDS  model,  Alston  et  al.  (1994),  Asche  and  Wessells  (1997), 
Moschini (1995) suggested a replacement of Stone price index by Laspeyres price index 
or other price indexes. 
 
Empirically, Chern et al. (2003) and Chern (2000) substituted the Stone price index with 
Laspeyres price index. On another hand, Jung and Koo (2000 and 2002) applied a finite 
change version of the Divisia Volume Index in the analyses of demand for meat and fish 
products in Korea. Chern et al. (2003), Chern (2000), and Jung and Koo (2000 and 2002) 
found that the application of the price indexes yielded similar demand elasticities like the 
original AIDS model.  
4.0  DATA AND ESTIMATION PROCEDURES 
 
This  study  uses  cross-sectional  data,  Household  Expenditure  Survey  2004/2005  data 
rather  than  time-series  data.  Chern  et  al.  (2003)  suggested  that  cross-sectional  data 
produces more plausible and reliable estimates of demand elasticities than time-series 
data. The Household Expenditure Survey 2004/2005 data consists of 14,084 respondents. 
The  large  number  of  households  provides  higher  degrees  of  freedom  in  econometric 
estimation than time-series data. 
 
Table  1  presents  the  percentage  of  Malaysian  households  with  zero  consumption  in 
2004/2005. Zero consumption happens when households did not purchase a meat during 
the survey period. Averagely, zero consumption is found to be the highest in other meats 
(98.55%),  followed  by  mutton  (97.37%),  pork  (82.19%),  beef  (63.26%),  and  poultry 
(24.23%).  
 
TABLE 1: Percentage of respondents with zero consumption, 2004/2005  
Meat  Percentage (%) 
Beef  63.26 
Pork  82.19 
Mutton  97.37 
Poultry  24.23 
Other meats  98.55 
Source: Household Expenditure Survey 2004/2005, Malaysia 
 
As  the  zero  consumption  rates  are  considerably  high  in  the  data,  the  estimation 
procedures are deemed necessary to utilize two-step estimator developed by Heien and 
Wessells (1990) to obtain the inverse Mills ratios (IMRs) via probit model. The ultimate 
purpose is to correct the possible bias created by the presence of zero consumption in the 
meat products.  
 
The IMRs are then incorporated into LA/AIDS model. The LA/AIDS model for the 5 
meat products can be estimated as follows: 
       
j k
i i i k k
L
i j ij i i imr H P x p w       ) / log( ) log(                              (1) 
where  i, j = 1, 2, ……., 5 meat products,  i w  is the budget share of the ith meat product, 
p is  the  price  of  the  ith  meat  product,  x  is  the  aggregate total  expenditure  of  meat, 
k H includes household size and dummy variable of urban,  i  ’s are random disturbances 
assumed with zero mean and constant variance, and 
L P  is Laspeyres price index for the 
aggregate food that can be defined by: 
 
i
i i P w P ) log( ) log(                         (2) 
 The adding up, homogeneity and symmetry restrictions are imposed for the LA/AIDS 
models. The adding-up restriction is satisfied with given  
i
i w 1 for all j:  
       
i
i
i
i
i i
ij i 0 , 0 , 0 , 1     and  0  
i
ki                           (3) 
The homogeneity restriction is satisfied for the LA/AIDS model in and only if, for all j: 
 
k
jk 0                                        (4) 
The symmetry is satisfied by: 
ji ij                                          (5) 
 
Followed  procedures  of  Green  and  Alston  (1990),  the  demand  elasticities  of  the 
LA/AIDS models can be computed at sample means. The expenditure elasticities can be 
estimated by: 
1  
i
i
i
w
e

                                   (6) 
The Marshallian measures of price elasticities can be computed by: 
j
i
i
i
ij
ij ij w
w w
s 







 







  
1  
   n j i ..., 1 ,                              (7)  
where  ij  is the Kronecker delta that is unity if i=  j and zero otherwise.  
 
Since the LA/AIDS model does not provide a direct estimate of income elasticity, Chern 
et al. (2003) and Chern (2000) suggested that an estimation of Engel function is useful to 
derive income elasticity from expenditure elasticity. The Engel function can be expressed 
as: 
     
k
k k
L H P X x      log log log 1 0                                             (8) 
where  xis total expenditures of the meat products, X is total expenditures of food and 
non-food consumer goods and services, 
L P  is Laspeyres price index for the aggregate 
food, and  is random disturbances assumed with zero mean and constant variance. 
 
The responsiveness of expenditure on food items by income change can be derived by,  
.
x
X
X
x
ee 

                                          (10) 
Hence, income elasticity can be estimated as follows: 
e i y e e e *                            (11) 
 
5.0  RESULTS 
 
Table 3 reports the estimated demand elasticities at sample mean, namely expenditure, 
income  and  own-price  elasticities.  Though  many  previous  studies  used  expenditure 
elasticities as proxies for income elasticities, the estimated expenditure elasticities in this 
study are indeed against Engel’s law. This is because as income rises, the proportion of 
income spent on food falls, even  if actual expenditure on food rises. In other words, income elasticity of demand for food must be less than 1
i. Thus, it is more appropriate to 
obtain the estimates of income elasticity in this study.  
 
The estimates of income elasticity are yielded by multiplying the estimated expenditure 
elasticities with the responsiveness of expenditure on food items by income change from 
Engel’s curve. All the estimates of income elasticities show that pork (0.6487), mutton 
(0.4975), poultry (0.4841), and beef (0.3179) are normal  and  necessity goods, except 
other meats (-5.0449). This is due to the fact that the other meats comprised of exotic 
meats (eg: horse meat) in the data. As per capita income increases, it is expected that 
Malaysian consumers are likely to increase their consumption for major meat products.  
 
All the estimates of own-price elasticities conform to the law of demand with negative 
signs.  The  estimated  own-price  elasticities  of  meat  products  range  between  -1.2743 
(poultry) and -10.4535 (other meats). It is noteworthy that the own-price elasticity for 
poultry (-1.2743) is the least elastic and followed by beef (-2.3840), mutton (-2.7838), 
pork (-5.6610), and other meats (-10.4535). This probably indicates the importance of 
poultry in Malaysians’ diet compared to other meat products.  
 
Table 2: Estimated demand elasticities of meat, Malaysia, 2004/2005 
Meat  Expenditure Elasticity  Income elasticity  Own-price elasticity 
Beef  0.7136  0.3179  -2.3840 
Pork  1.4560  0.6487  -5.6610 
Mutton  1.1168  0.4975  -2.7838 
Poultry  1.0866  0.4841  -1.2743 
Other meats  -11.3242  -5.0449  -10.4535 
 
6.0  CONCLUSIONS 
 
This  study  aims  to  analyze  meat  consumption  behaviors  in  Malaysia  by  estimating 
income and own-price elasticities. Expenditure and own-price elasticities are estimated 
by Linear Approximate Almost Ideal Demand System (LA/AIDS) model in the first stage, 
followed  by  estimation  of  Engel  function  in  the  second  stage  in  order  to  obtain  the 
estimates  of  income  elasticities  for  the  meat  products  using  Household  Expenditure 
Survey 2004/05 data.  
 
Though this study shows that there would be increasing demand for major meat products 
among Malaysians in the future, the role of the meat products has diminished from luxury 
goods  to  become  normal  and  necessity  goods.  Such  indication  has  very  important 
implication to meat producers wondering Malaysian consumers are increasing consuming 
more meats whether in the form of quantity or quality.  
 
                                                 
i As explained by Holcomb et al. (1995), note that  y pq w /  w, where  p is price of food and q is the 
quantity  of  food,  respectively.  According  to  Engel’s  law, 0 /    y w .  But,  
) / ( ) / )( / ( / y w y q y p y w       .  Then  w y q p    ) / ( under  the  condition  that  0 /    y w . 
Hence,  1   , where  is income elasticity. Another perspective of this study observes that the estimates of the own-price elasticities 
of  demand  for  all  the  meat  products  are  greater  than  unity.  It  means  that  Malaysian 
consumers  are  generically  sensitive  to  the  changes  in  own-price  of  the  major  meat 
products. In the case of beef market, it is then reasonable to open the market to more 
abattoirs. This move will definitely make the beef more affordable and further introduce 
higher quality of beef to Malaysians.    
 
REFERENCES 
 
Alston, J.M., Foster, K.A. and Green, R.D. (1994) Estimating Elasticities with the Linear 
Approximate Almost Ideal Demand Systems, Economic Letters, 71: 351-56. 
 
Asche,  F.  and  Wessells,  C.R.  (1997)  ‘On  Price  Indices  in  the  Almost  Ideal  Demand 
System, American Journal of Agricultural Economics, 79: 1182-85. 
 
Baharumshah,  A.Z.  and  Mohamed,  Z.A.  (1993)  Demand  for  Meat  in  Malaysia:  An 
Application  of  the  Almost  Ideal  Demand  System  Analysis,  Pertanika  Social 
Science and & Humanities, 1 (1): 91 – 95. 
 
Buse,  A.  (1994)  Evaluating  the  Linearized  Almost  Ideal  Demand  System,  American 
Journal of Agricultural Economics, 76: 781-793. 
 
Chern,  W.S.  (2000)  Assessment  of  Demand-Side  Factors  Affecting  Global  Food 
Security. Chapter 6, in Wen S. Chern, Colin A. Carter, and Shun-Yi Shei, eds. 
Food Security in Asia: Economics and Policies. Cheltenham, UK: Edward Elgar 
Publishing Limited. 
 
Chern, W.S., Ishibashi, K., Taniguchi, K. and Yokoyama, Y. (2003) Analysis of Food 
Consumption  Behavior  by  Japanese  Households,  Economic  and  Social 
Development Paper, Food and Agricultural Organization, 152.  
 
Deaton,  A,  and  Muellbauer,  J.  (1980)  An  Almost  Ideal  Demand  System,  American 
Economics Review, 70.  
 
Hahn,  W.  (1994)  Elasticities  in  AIDS  Models:  Comments,  American  Journal  of 
Agricultural Economics, 76: 972-977. 
 
Heien  D.  and  Wessells  C.R.  (1990)  Demand  system  estimation  with  microdata:  a 
censored regression approach, Journal of Business & Economic Statistics, 8(1): 
365–371. 
 
Holcomb, R., J. Park, and 0. Capps, Jr. (1995) Examining Expenditure Patterns for Food 
at Home and Food Away from Home, Journal of Food Distribution Research, 
26:1-8. Jung, J. and Koo, W.W. (2000) An Econometric Analysis of Demand for Meat and Fish 
Products  in  Korea,  Agricultural  Economics  Report  No.  439,  Northern  Plains 
Trade Research Center, North Dakota State University. 
 
Jung, J. and Koo, W.W. (2002) Demand for Meat and Fish Products in Korea, in the 
Annual Meeting of American Agricultural Economics Association, Long Beach, 
California, July 28-31, 2002. 
 
Moschini,  G.  (1995)  Units of  Measurement  and the  Stone  Index  in  Demand  System, 
American Journal of Agricultural Economics, 77: 63-68. 
 
Nik  Mustapha,  R.A.  (1994)  Incorporating  Habit  in  the  Demand  for  Fish  and  Meat 
Products in Malaysia, Malaysian Journal of Economic Studies, 31 (2): 25 – 35. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Appendix 1: Maximum likelihood estimates of the LA/AIDS model 
  Beef  Pork  Mutton  Poultry  Other meats 
  Coefficient  Coefficient  Coefficient  Coefficient  Coefficient 
  (Std. Error)  (Std. Error)  (Std. Error)  (Std. Error)  (Std. Error) 
Intercept  0.1072  0.2211  -0.1217  -0.0219  0.8154 
  (0.0203)***  (0.0136)***  (0.0085)***  (0.0181)  - 
Log (price of beef)  -0.2355  -0.0649  -0.0083  -0.1068  0.4154 
  (0.0040)***  (0.0028)***  (0.0017)***  (0.0054)***  - 
Log (price of pork)  -0.4133  -0.4133  0.0106  -0.7086  1.5246 
  (0.0086)***  -  (0.0064)*  (0.0201)***  - 
Log (price of mutton)  -0.3263  -0.0185  -0.0185  -0.6841  1.0474 
  (0.0925)***  (0.0359)  -  (0.1257)***  - 
Log (price of poultry)  -0.3245  0.1095  -0.1945  -0.1945  0.6040 
  (0.0258)***  (0.0187)***  (0.0106)***  -   
Log (price of other meats)  1.2996  0.3872  0.2106  1.6940  -3.5914 
  -  -  -  -   
Log (x/Laspeyres price index)  -0.0506  0.0401  0.0012  0.0517  -0.0424 
  (0.0030)***  (0.0021)***  (0.0013)***  (0.0037)***  - 
Log (household size)  0.0096  0.0006  0.0005  0.0315  -0.0422 
  (0.0006)***  (0.0005)  (0.0003)*  (0.0009)***  - 
Urban dummy  -0.0468  0.0417  0.0052  -0.0038  0.0037 
  (0.0031)***  (0.0022)***  (0.0013)***  (0.0042)  - 
IMR  0.3661  0.6241  0.5314  -0.0219  0.8154 
  (0.0033)***  (0.0053)***  (0.0040)***  (0.0181)  - 
Note: Significance levels are denoted by *** for 1%, ** for 5%, and * for 10%.
 Appendix 2: Regression results for Engel curve analyses 
  Coefficient  (Std. Error) 
Intercept  0.3984  (0.1120)*** 
Log (total expenditure)  0.4455  (0.0077)*** 
Laspeyres price index  0.6629  (0.0486)*** 
Log (household size)  0.0291  (0.0088)*** 
Urban  -0.1240  (0.0103)*** 
Note: Significance levels are denoted by *** for 1%, ** for 5%, and * for 10%.
 
 

An Almost Ideal Demand System,

Analysis of Food Consumption Behavior by Japanese Households, Economic and Social Development Paper, Food and Agricultural Organization,

Assessment of Demand-Side Factors Affecting Global Food Security. Chapter 6,

Demand for Meat and Fish Products

Demand for Meat in Malaysia: An Application of the Almost Ideal Demand System Analysis,

Demand system estimation with microdata: a censored regression approach,

Elasticities in AIDS Models: Comments,

Estimating Elasticities with the Linear Approximate Almost Ideal Demand Systems,

Demand for meat products in Malaysia

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics