Ethiopia is known to have one of the largest livestock populations in the world. Yet the
overall contribution of livestock products to households’ daily consumption is very limited.
The average per capita annual consumption of meat and dairy products are just 4.6 kg and
16.7 kg, respectively. Given recent growth in income, there is potential for growth in the
demand for livestock products.
This study attempts to estimate elasticities of livestock products. We use the Household
Income, Consumption, and Expenditure Survey (HICES), the Welfare Monitoring Survey
(WMS), and Retail Prices of Goods and Services of 2004/05 data sets of the Ethiopian
Central Statistical Agency (CSA). Descriptive analysis of budget shares from livestock
products shows that such products account for a very small share of total household
expenditure and food expenditure, even by African standards. There is also a remarkable
difference in the composition of livestock products between rural and urban areas. When
viewed across income categories, the study also reveals that richer households tend to have
higher consumption of livestock products. For the econometric analysis, we chose the
Quadratic Almost Ideal Demand System (QUAIDS) model for its efficiency and reliability of
results. The estimated figures reveal that there is a considerable expenditure and price
response for livestock products in Ethiopia. It also appears that rural areas have higher
expenditure elasticities than urban areas. Furthermore, price responses are higher in rural
areas than urban areas. Similarly, own-price responses exhibit wide variation across
commodities. We also found a strong substitution relationship among most livestock
products.