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Vol. 72, No. 2, pp. 113-127 (2021)

“Rising Food Prices and Engel's Coefficients: Approaching with the QUAIDS Model”
Daiki Haijima (Policy Planning and research Division, Minister’s Secretariat, Ministry of Finance)

This paper analyzes the relationship between rising food prices and Engel's coefficients in Japan since 2013 by structural estimation of household consumption demand, using Quadratic Almost Ideal Demand System (QUAIDS). By estimating household consumption of 49 cities in Japan from 2000 to 2018, I simulate how consumption behavior changes if there were no rise in food prices in Japan since 2013. Simulation results shows the increase in food prices since 2013 caused a rise of up to 1.91 percentage points for the engel’s coefficient. Moreover, the rise in food prices caused a decrease in real household consumption and a rise in cost of living expense index.