Demand for U.S. Lamb and Mutton: A Two Stage Differential Approach

Estimates of price and scale demand elasticities for lamb and mutton consumed in the United States are derived. The U.S. lamb and mutton consumption comprises primarily of domestic production, and imports from two countries-Australia and New Zealand. The Netherlands Central Bureau of Statistics (CBS) demand system derived by Keller and Van Driel (1985) is employed. The CBS model is preferred as it combines non-linear Engel curves with the simplicity of the Slutsky matrix and allows for the ease of implementing concavity and other restrictions. Empirical results for own-price elasticities of demand indicate that U.S. demand for Australian lamb demand is highly elastic while U.S. demand for New Zealand and domestic lamb was inelastic. The scale demand elasticity results indicate that if the U.S. increases total demand for lamb, Australia and New Zealand's share of total demand will more than proportionately increase while the U.S. share of total demand will decrease. The scale elasticities show that domestic lamb is an inferior good.