Consumer health information and changing preferences for fats and oils in Japan: Cointegration and a complete demand system approach

This study investigates the major factors affecting the demand for fats and oils under the possible influence of health information in Japan. A conceptual and empirical framework is developed to specify two demand models including a health information variable: a derived demand model for soybean oil and rapeseed oil, and a demand model for all fats and oils. Three distinct fat and cholesterol information indexes are constructed using the numbers of relevant medical articles and different weighting schemes. The index developed in this study exhibits strikingly different historical patterns of consumer health information than the time trend or an ad-hoc cumulative index. These indexes are incorporated into the two demand models to evaluate the impacts of health information on the demand for various fats and oils.;The linear functional form is chosen to examine the factors affecting the declining market share of soybean oil since 1987, while the general nonlinear Lewbel model, nesting AIDS and Translog demand models as two special cases, is employed to examine the behavior patterns of Japanese consumers for various fats and oils. Specification tests strongly reject both the AIDS and Translog demand models. Tests for unit-root nonstationarity and cointegration are conducted for all variables and the two demand models, respectively. The estimation results indicate that the declining market share of soybean oil relative to rapeseed (canola) oil has been caused by the declining total meat production and increasing total meat imports. Both changes have been induced by meat trade liberalization since 1988, and not by concerns of the Japanese about fat and cholesterol. However, health concerns are shown to have significant impacts on the choices of fats and oils, particularly the substitution between animal fats and vegetable oils in Japan. The simulation results show that health risk concerns, as measured by the indexes considering the carryover and decaying effects of published medical articles, reduce the consumption of saturated fat as well as total fat. Also, the fat and cholesterol information index developed in this study appears to reflect the changing health information on fat and cholesterol much better than a simple ad-hoc cumulative index.