A System of Demand Equations Satisfying Effectively Global Regularity Conditions

Russel J. Cooper and Keith R. McLaren

No 267397, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: A parametric specification of an indirect utility function in terms of 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 demonstrates the value of the generalization.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 32
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267397

DOI: 10.22004/ag.econ.267397

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