Parameter stability and the u.s. demand for beef

TLDR: In this article, the authors test the hypothesis that consumer preferences for beef in the United States have been affected by structural change, which reduces to testing for parameter stability in estimated demand equations.

Abstract: The main objective of this paper is to test the hypothesis that consumer preferences for beef in the United States have been affected by structural change, which reduces to testing for parameter stability in estimated demand equations. To this end, alternative specifications of the demand function are estimated using a general form of the Box-Cox transformation. Tests based on recursive residuals and on the F distribution provide little evidence of structural change, and suggest that the recent decline in beef consumption may be explained by changes in relative prices. The sizable decline in U.S. beef consumption that has taken place in recent years has led to some speculation, in both the popular and professional literature, that the demand for beef may have been affected by a structural change resulting, ceteris paribus, in consumption levels lower than those of the early 1970s (Bertin; Hieronymus; Chavas). The cause of this alleged structural shift is often ascribed to the increased nutritional consciousness of consumers concerned with limiting their intake of fat and cholesterol. Whether the decrease in the consumption of beef is a result of changed market conditions (relative prices and income), or reflects a more fundamental change in the underlying consumers' preferences, is an important question for both the beef industry and agricultural economists. Indeed, if the consumption decline is due to market forces, there is little that the beef industry can do, other than wait for a more favorable economic climate. If, however, there has been a structural shift in the demand for beef, the industry needs to pur