Application of the Inverse Almost Ideal Demand System to Welfare Analysis

Frank Jensen (), Max Nielsen () and Eva Roth ()
Additional contact information
Eva Roth: Department of Environmental and Business Economics, University of Southern Denmark

No 43/03, Working Papers from University of Southern Denmark, Department of Sociology, Environmental and Business Economics

Abstract: This paper presents the theoretical properties of the Inverse Almost Ideal De-mand System and applies the system on time series data for cod, herring and plaice in Denmark (1986 to 2001). Furthermore, the shortcoming of the Inverse Almost Ideal Demand System when applied to welfare analysis is discussed. The properties of the demand system show that - since the demand system is a second-order approximation to the true system - it does not have global appli-cability for welfare measurement. It may, therefore, not satisfy the conditions for calculation of consumer surplus (negative slope and positive point of inter-section with the price-axis). The theoretical point is illustrated by an empirical example of the Danish fish market. Using a vector auto regressive model in er-ror correction form to overcome the problem of non-stationarity of data, the In-verse Almost Ideal Demand System is estimated. For cod the intercept is nega-tive and for herring and plaice the slope of the demand function is positive in the data interval investigated. Thus, the estimated demand system is not suitable for welfare analysis.

Keywords: Inverse Almost Ideal Demand System; Welfare analysis; Co-integration and Fish (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sdu.dk/~/media/Files/Om_SDU/Institutter/Miljo/ime/wp/roth43.ashx First version, 2003-07 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.sdu.dk:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sdk:wpaper:43

Access Statistics for this paper

More papers in Working Papers from University of Southern Denmark, Department of Sociology, Environmental and Business Economics Contact information at EDIRC.
Bibliographic data for series maintained by Ulla H. Oehlenschläger ( this e-mail address is bad, please contact ).