An Empirical Analysis of Households’ Demand for Organic and Conventional Flour in the United States: Evidence from the 2014 Nielsen Homescan Data

Using the 2014 Nielsen Homescan panel data, the Heckman two-stage sample selection model is used to estimate the likelihood of purchasing organic or conventional flour as well as the quantity purchased of organic and conventional flour. A number of demographic variables are found to be statistically significant impacting the likelihood of purchasing organic and conventional flour. Conditional on the decision whether to buy organic or conventional flour, the estimation of the second-stage equations shows that the statistically significant factors of the demand for organic flour are own price, household income, household size, age, employment status, and race, while for conventional flour significant factors are own price, organic flour price, household income, household size, education level, marital status, and race.

Based on the calculated own-price elasticities of demand for organic and conventional flour, the demand for both flour types is inelastic. Cross-price elasticities of demand suggest an asymmetric pattern between organic and conventional flour demand. Finally, based on the negative income elasticity estimates, organic and conventional flour are inferior goods.