Town size and the consumer behaviour of Spanish households: a panel data approach

The aim of this paper is to analyse the effect of town size on the Spanish demand for food. The methodological approach followed in the study is to use panel data built from the Spanish Quarterly National Expenditure Survey to estimate a demand system. The use of this type of data allows control for unobserved time invariant heterogeneity as well as to take into account the time and the cross-section dimension of data. Four locations are distinguished: (1) less than 10 000 inhabitants; (2) between 10 000 and 100 000 inhabitants; (3) between 100 000 and 500 000 inhabitants; and (4) more than 500 000 inhabitants. Eight broad food categories are considered: (1) cereals and potatoes; (2) meat; (3) fish; (4) dairy products; (5) fats and oils; (6) fruits; (7) vegetables; and (8) other food. Income and price elasticities are calculated for each location. In general terms, two general conclusions can be drawn. First, results indicate that only slight changes in tastes have taken place during the analysed period; second, income and price elasticities use to decrease as town size increases.