Household Demand for Food in Switzerland. A Quadratic Almost Ideal Demand System

In this paper we estimate a complete demand system for Switzerland, with emphasis on food demand, using a recent household expenditure survey. The Quadratic Almost Ideal Demand System (QUAIDS) is employed in the analysis of six food commodity and a non-food groups. The quadratic terms in the QUAIDS were found to be empirically important in describing household budget behaviour in Switzerland. For most food commodity groups, demand is inelastic, with elasticities ranging between -0.64 and -1.02. Cross-price elasticities are very low, suggesting limited possibilities of substitution between food groups. All food groups are found to be necessities, while the non-food group is a luxury. The estimated own-price and expenditure elasticities from the specification on groups segmented by income show that for most food commodities, own-price (absolutely) and expenditure elasticities are consistently higher for the lower income group.