Urbanisation and the demand for food

Abstract

Is the demand for food influenced by urbanisation, and if so, in what way? This paper reviews the relevant literature on this question and conducts an empirical investigation for Indonesia, asking whether the economic relationship between food demand and the conventional economic explanatory variables is altered by structural changes in the degree of urbanisation. Urbanisation is associated with changes in both levels of household expenditures and preferences and it is therefore analytically necessary to separate these two effects. Some of the effects commonly attributed to urbanisation occur among rural households whose expenditures increase but who do not move to urban areas. The paper shows that urbanisation marginally reduces expenditure on food,and also marginally reduces the responsiveness of this expenditure share to changes in total expenditure. More important, it shifts the commodity composition of this demand, but in ways that are more nuanced than earlier literature reveals.