Thesis Re-print: Does Selling Fruits or Vegetables - Department of ...

Growth in income and urban population shares have led to a situation where
expenditure on fresh produce, meat and dairy products is rising more rapidly across
developing countries than anywhere in the world. In the long-run, as incomes rise, the
income elasticity of demand for food falls. This can be represented by comparing the
relative income elasticities for a variety of food groups in Mozambique to a higher-
income country such as the United States, as is visually depicted in figure 4. The income
elasticity for a crop represents the percentage change in consumption for a 1% rise in
income. In every food category, the income elasticity of demand in the U.S. is less than
the respective elasticity in Mozambique, meaning that if those in the U.S. received 10%
more in income, their spending on food would rise less in percentage terms than the
respective expenditures of an average African. The reason for this is intuitive: as
incomes rise, proportionately less of one’s salary needs to be spent on items such as food,
and can be designated to functions or items that are less vital or necessary to life: this is
Engel’s Law. Bennett’s Law represents a similar and related concept which is also
evidenced by the elasticity patterns in figure 4: as incomes rise, the types of foods that are
consumed tend to transition from cheaper and often less nutritionally-rich goods such as
grains, to “luxury” food items such as dairy, meat, and fresh produce. All of the latter
food types have higher income elasticities than the elasticity for cereal, which is actually
negative in the case of the U.S. Given these two economic principles (Engel’s Law and
Bennett’s Law) at work in lower-income developing countries such as Mozambique,
expenditure on fresh produce is rising much more rapidly with increasing incomes in
these countries than it is in more developed countries such as Europe and the U.S., and
will continue to do so until incomes across the region are much higher.
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