A Simple Nested Test of AIDS

Keith R. McLaren, Jane M. Fry and Tim R. L. Fry

No 267417, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The MPIGLOG specification of an indirect utility function gives rise to Cooper and McLaren's (1992) Modified AIDS (MAIDS) specification, which nests AIDS. Following the 'combined' approach outlined by Fry, Fry and McLaren (1993), we transform our deterministic equations to logratio form for estimation. This procedure not only restricts the shares implied by the model to the unit simplex, but also provides a transparent representation of the restriction implied by AIDS. We estimate MAIDS (with and without the AIDS restriction imposed) using the 'combined' approach and proceed to test the AIDS restriction.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 14
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267417

DOI: 10.22004/ag.econ.267417

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