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A general expenditure system for estimation of consumer demand functions

Simona Bigerna (), Carlo Andrea Bollino () and Maria Chiara D’Errico ()
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Maria Chiara D’Errico: University of Perugia

Economia Politica: Journal of Analytical and Institutional Economics, 2020, vol. 37, issue 3, No 12, 1088 pages

Abstract: Abstract The class of flexible functional forms for the utility and cost function has been characterized by the pioneering work of Gorman (Some Engel curves. In: Deaton A (ed) Essays in the theory and measurement of consumer behaviour. Cambridge Univ. Press, Cambridge, 1981), known as the Gorman polar form. Despite several decades have elapsed, the economic literature has not found the most general functional form that satisfies Gorman’s theorem. This note provides a new general theoretical and parametric formulation of demand functions, labeled general expenditure system (GES), satisfying the Gorman requirement that the Engel curve cannot exceed a polynomial of third degree in expenditure. Estimates show that the GES is a significant generalization of previous popular flexible functions.

Keywords: Integrable demand functions; General expenditure system; Gorman polar form (search for similar items in EconPapers)
JEL-codes: C30 D01 D11 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40888-019-00154-8

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Handle: RePEc:spr:epolit:v:37:y:2020:i:3:d:10.1007_s40888-019-00154-8