Estimation of a Two-Stage LES-AIDS Consumer Demand System for Eight EC Countries

J Michalek and Michiel Keyzer

European Review of Agricultural Economics, 1992, vol. 19, issue 2, 137-63

Abstract: This paper discusses specification and an estimation of a two-stage Linear Expenditure System-Almost Ideal Demand System (LES-AIDS) consumer demand system for eight EC countries. The upper level allocates uncommitted expenditure via an AIDS system between food, beverages, and other commodities. The technique used exploits the fact that there are only three AlDS-aggregates to explicitly maintain concavity of the expenditure function within a given range of budget shares; it also ensures consistency of the aggregate price index in the AIDS with the parameters of the system. The lower level allocates food via an LES-system for ten categories, with time-dependent commitments. Empirical results look promising. Copyright 1992 by Oxford University Press.

Date: 1992
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