An Empirical Analysis of Households' Demand for Organic and Conventional Flour in the United States: Evidence from the 2014 Nielsen Homescan Data

Document Type

Thesis

Degree Name

Master of Science (MS)

Department

Ag Science and Natural Resources

Date of Award

Fall 2018

Abstract

Using the 2014 Nielsen Homescan panel data on household purchases, the Heckman two-stage sample selection model was estimated to evaluate the impact of household demographic variables and prices on the likelihood of purchasing organic or conventional flour as well as on the quantity purchased of organic and conventional flour. The estimation results revealed that a number of household demographic variables were key determinants of the likelihood of purchasing organic or conventional flour. In particular, the findings from the first-stage probit model of Heckman's two-stage procedure showed that the likelihood of purchasing organic flour was statistically significantly affected by the employment status, education level, marital status, race, and region, while the likelihood of purchasing conventional flour was statistically significantly driven by household size, age, employment status, education level, marital status, race, and region. Conditional on the decision whether to buy organic or conventional flour, the estimation of the second-stage equations from the Heckman two-stage model for both flour types identified the statistically significant factors of the demand for organic and conventional flour. In particular, the statistically significant factors of the demand for organic flour included own price, household income, household size, age, employment status, and race, while the statistically significant factors of the demand for conventional flour were own price, organic flour price, household income, household size, education level, marital status, and race.Based on the calculated own-price elasticities of demand for organic and conventional flour, the demand for both flour types was found to be inelastic. Cross-price elasticities of demand indicated an asymmetric pattern between organic and conventional flour demand. In particular, the cross-price elasticity of the organic flour demand with respect to the price of conventional flour suggested a substitutability relationship between the two flour types. However, the cross-price elasticity of the conventional flour demand with respect to the price of organic flour showed a complementary relationship between the two flour types. Finally, based on the negative income elasticity estimates, organic and conventional flour were found to be inferior goods.The results of the first stage of the Heckman two-stage sample selection model were previously presented in February at the 2018 Southern Agricultural Economics Association's annual meeting in Jacksonville, Florida (Poghosyan & Bakhtavoryan, 2018). The manuscript is available online.

Advisor

Rafael Bakhtavoryan

Subject Categories

Agriculture | Life Sciences

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