Abstract

This study examines whether rural and urban households in Bangladesh respond differently to changes in food budgets, prices, and demographic characteristics. Using Household Income and Expenditure Survey (HIES) 2022 microdata from the Bangladesh Bureau of Statistics, we aggregate food purchases into ten groups and estimate a censored Quadratic Almost Ideal Demand System (QUAIDS) model in an analytical sample of 14,388 households. The estimates reveal a common pattern of expenditure-driven diversification but sharper spatial differences in price responses. Meat has the largest expenditure elasticity, at about 2 in both areas, while fruits and eggs & milk are also expenditure elastic. Rice, vegetables, and oil & fat are expenditure inelastic. Significant rural-urban differences in expenditure elasticities are concentrated in rice, wheat & bread, eggs & milk, oil & fat, and confectionery. All own-price elasticities are negative. Rural households are more price responsive for rice, meat, fish, eggs & milk, fruits, confectionery, and eating out, whereas urban households are more responsive for wheat & bread and oil & fat; responses for vegetables are almost identical. Compensated cross-price and Morishima elasticities further show that substitution pathways, particularly those involving eating out, vary by residence. Significant demographic-effect differences are also found for selected household characteristics. The findings indicate that food-policy analysis in Bangladesh should account for rural-urban differences in demand sensitivity and substitution rather than relying on a single national demand response.

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