Consumer behaviour in a country in transition with a strongly contracting economy: The case of food consumption in Bulgaria

This paper presents estimates of demand elasticities in Bulgaria using the Almost Ideal Demand system while using interval priors for the parameters, Expenditure elasticities are found to be considerably higher than unity for food items. These results are interpreted as being due to a substantial di vergence between consumption and expenditure on food items. It is concluded that under conditions of falling incomes, polices which focus exclusively on food provision mag not be appropriate. In the event of a return to incom e growth, an initial increase in demand for selected food items could outst rip the potential to increase domestic supply, and lead to an increase in i mports, or decrease in exports, of a number of agricultural products.