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A System of Demand Equations Satisfying Effectively Global Curvature Conditions

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  • RUSSEL J. COOPER
  • KEITH R. McLAREN
  • PRIYA PARAMESWARAN

Abstract

The MP1GLOG specification of an indirect utility function allows a parametric representation in terms of expenditure and two unit cost functions. An appropriate specification of these unit cost functions resolves the conflict between the need for flexibility and satisfaction of curvature restrictions by allowing the use of a flexible unit cost function which satisfies curvature conditions for all positive prices. The resulting demand system will then satisfy curvature restrictions over a wide range of prices and expenditures, and hence allow policy conclusions consistent with the restrictions of economic theory.

Suggested Citation

  • RUSSEL J. COOPER & KEITH R. McLAREN & PRIYA PARAMESWARAN, 1994. "A System of Demand Equations Satisfying Effectively Global Curvature Conditions," The Economic Record, The Economic Society of Australia, vol. 70(208), pages 26-35, March.
    • Handle: RePEc:bla:ecorec:v:70:y:1994:i:208:p:26-35
    DOI: 10.1111/j.1475-4932.1994.tb01822.x
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    References listed on IDEAS

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    1. Lewbel, Arthur, 1987. "Fractional demand systems," Journal of Econometrics, Elsevier, vol. 36(3), pages 311-337, November.
    2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-383, June.
    3. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
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    6. Russel J. Cooper & Keith R. McLaren, 1992. "An Empirically Oriented Demand System with Improved Regularity Properties," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 652-668, August.
    7. Caves, Douglas W & Christensen, Laurits R, 1980. "Global Properties of Flexible Functional Forms," American Economic Review, American Economic Association, vol. 70(3), pages 422-432, June.
    8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Powell, Alan A. & McLaren, Keith R. & Pearson, K.R. & Rimmer, Maureen T., 2002. "Cobb-Douglas Utility - Eventually!," Conference papers 330977, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. William Barnett & Meenakshi Pasupathy, 2003. "Regularity of the Generalized Quadratic Production Model: A Counterexample," Econometric Reviews, Taylor & Francis Journals, vol. 22(2), pages 135-154.
    3. Denis Conniffe, 2006. "Indirect addilog translation of indirect utility functions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(4), pages 1388-1397, November.
    4. Kancs, d'Artis, 2002. "Modelling Renewable Energy Policies," Conference papers 331030, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Maureen T. Rimmer & Alan A. Powell, 1994. "Engel Flexibility in Household Budget Studies: Non-parametric Evidence versus Standard Functional Forms," Centre of Policy Studies/IMPACT Centre Working Papers op-79, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Abiodun Elijah Obayelu & V.O. Okoruwa & O.I.Y. Ajani, 2009. "Cross‐sectional analysis of food demand in the North Central, Nigeria," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 1(2), pages 173-193, January.

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