Estimating the Demand Elasticities of Rice in the Philippines

Demand for rice in the Philippines has strengthened over time and at present, accounts for twenty percent of a typical Filipino household’s daily expenditure. This study estimated the demand elasticities of rice that can be used to scientifically calculate and quantify the actual level of rice demand in the Philippines. This was done by developing an appropriate demand equation to calculate income and price elasticity parameters. Other factors that influence demand for rice were also identified, and using the elasticity parameters, the level of per capita rice demand and extent of commodity substitution with changes of incomes and relative prices of commodities was validated. The vulnerability and resilience of low income and rural groups to price and income shocks was also determined.

The results of the of the study pointed to several policy implications which could be used in developing strategic actions to achieve the country’s Rice Self-Sufficiency goal by 2013, where a key approach is the reduction of domestic rice demand. It was recommended that a selective and targeted price intervention be implemented as a short-run strategy because, accordingly, rice at subsidized prices must only be availed primarily by the poorest of the poor and perhaps, must be more accessible in rural areas and regions with very high poverty incidence. To complement this, the study also recommended that income-generating interventions should be prioritized by the government. Since most of the poor consumers come from rural areas, country-side development should done to reduce poverty incidence in these areas through provision of better jobs and income opportunities, and consequently to potentially reduce rice consumption of rural consumers.

Partners:

• Philippine Rice Research Institute
• University of the Philippines Los Baños

Date Completed: December 2011