Econometric Study of the Price Differences Impact between Domestic and Imported Cattle Meat on Egyptian Consumer Surplus

In addition to livestock sector challenges in Egypt, beef and veal market suffers from decreasing self-sufficiency rate from 75% to 56%, and increasing prices of domestic and import beef during (2002- 2020). The problems of this study are: (1) the variation of price increase between domestic and imported beef may declines consumer welfare, (2) imported beef is very discriminated by origin of country (Brazil, India, and rest of world) and product type (boneless and in-bone), and so the total aggregation may causes considerable bias in demand model. According to mentioned problems, the paper aims at: (1) Econometric estimation of the demand system to derive elasticity parameters and check the model inconsistency or aggregation bias. (2) Calculation consumer surplus due to price increase of domestic and imported beef. Rotterdam demand system in the framework of aggregation bias approach is applied to get consistent parameters. Results verify the existence of aggregation problem according to Wald test in the restricted Seemingly Unrelated Regression Estimation (SURE) model. Additionally, for domestic beef, expenditure elasticity is lower than one, and more than one for foreign beef. On the other hand, price elasticity of domestic beef is inelastic and weakly substitute for the foreign beef, while the contrary is not true for foreign beef. Consumers should be compensated by about 21.5% and 10.5 % respectively as domestic and foreign beef prices increase over the average prices. Future research should consider the aggregation bias in estimating elasticities and consumer welfare in demand systems under various income categories and sectors.