A System of Demand Equations Satisfying Effectively Global Regularity Conditions

Russel Cooper and Keith McLaren

The Review of Economics and Statistics, 1996, vol. 78, issue 2, 359-64

Abstract: A parametric specification of an indirect utility function in terms Oaf expenditure and two unit cost functions is proposed. Specification of these unit cost functions in terms of regular functions leads to the notion of an 'effectively globally regular' system of demand equations; that is, a system of demand equations that is regular over a cone in expenditure-price space, and for which the regular region includes all points in any given sample, and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum. This general model nests a number of popular demand systems, such as the Linear Expenditure System, as special cases. An empirical application illustrates some of these ideas. Copyright 1996 by MIT Press.

Date: 1996
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