On Price Endogeneity in the Analysis of Food Demand in China
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Price endogeneity has been ignored in previous analyses of food demand in China.
We exploit farm price data collected from the China National Bureau of Statistics to account for
price endogeneity using reduced form price equations. Applying our unique econometric
approach to the analysis of provincial-level food demand in China, we find strong statistical
evidence of price endogeneity. Models that ignore price endogeneity result in substantial upward
biased estimates of future food demand in China.