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Unstable Models from Incorrect Forms

Author

Listed:
  • Julian M. Alston
  • James A. Chalfant

Abstract

Parametric tests for structural change are conditional on the joint hypothesis of functional form and other aspects of the model specification. This problem is often disregarded. Monte Carlo evidence using three data sets indicates that apparently innocuous specification errors can lead to substantial increases in the probability of finding structural change when it is not present in the data-generating mechanism. Significant Chow tests and autocorrelation are much more likely when the wrong functional form is used. Maximum Chow tests falsely reject stable preferences much more often than their nominal size suggests, even when the correct model is estimated.

Suggested Citation

  • Julian M. Alston & James A. Chalfant, 1991. "Unstable Models from Incorrect Forms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1171-1181.
    • Handle: RePEc:oup:ajagec:v:73:y:1991:i:4:p:1171-1181.
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    Cited by:

    1. Vardges Hovhannisyan & Marin Bozic, 2017. "Price Endogeneity and Food Demand in Urban China," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 386-406, June.
    2. Michael Burton & Richard Dorsett & Trevor Young, 2000. "An investigation of the increasing prevalence of nonpurchase of meat by British households," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1985-1991.
    3. Okrent, Abigail M. & Alston, Julian M., 2011. "Demand for Food in the United States: A Review of Literature, Evaluation of Previous Estimates, and Presentation of New Estimates of Demand," Monographs, University of California, Davis, Giannini Foundation, number 251908, December.
    4. Alston, Julian M. & Chalfant, James A., 1991. "Can We Take The Con Out Of Meat Demand Studies?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(1), pages 1-13, July.
    5. Just, Richard E., 2000. "Some Guiding Principles for Empirical Production Research in Agriculture," Agricultural and Resource Economics Review, Cambridge University Press, vol. 29(2), pages 138-158, October.
    6. Sarker, Dr. Rakhal & Koto, Prosper & Cassidy, Heather, 2015. "A Demand System for Major Dairy Products in Ontario," 2015 Conference, August 9-14, 2015, Milan, Italy 212689, International Association of Agricultural Economists.
    7. Wildner, Susanne, 2001. "Quantifizierung der Preis– und Ausgabenelastizitäten für Nahrungsmittel in Deutschland: Schätzung eines LA/AIDS," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 50(05), pages 1-11.
    8. Ikerne del Valle & Jordi Guillen & Kepa Astorkiza, 2017. "Substituting hake with sardines? Economic crisis and fish demand in Spain," Agribusiness, John Wiley & Sons, Ltd., vol. 33(4), pages 600-610, September.
    9. Vardges Hovhannisyan & Brian W. Gould, 2014. "Structural change in urban Chinese food preferences," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 159-166, March.
    10. Just, Richard E., 1993. "Discovering Production and Supply Relationships: Present Status and Future Opportunities," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 61(01), pages 1-30, April.
    11. Rickertsen, Kyrre, 1998. "The demand for food and beverages in Norway," Agricultural Economics, Blackwell, vol. 18(1), pages 89-100, January.
    12. Just, Richard E., 2003. "Risk research in agricultural economics: opportunities and challenges for the next twenty-five years," Agricultural Systems, Elsevier, vol. 75(2-3), pages 123-159.
    13. MacDonald, Stephen, 1997. "Global End-Use Demand for Cotton: A Time-Varying Parameter Model," MPRA Paper 70911, University Library of Munich, Germany.
    14. Mooney, Sian & Antle, John M. & Capalbo, Susan Marie & Paustian, Keith H., 2003. "Incorporating Uncertainty In Integrated Assessment Modeling," 2003 Annual meeting, July 27-30, Montreal, Canada 22225, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Hovhannisyan, Vardges & Gould, Brian W., 2012. "Structural Changes in Chinese Food Preferences," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125978, Agricultural and Applied Economics Association.
    16. San Miguel, Fernando & Ryan, Mandy & Scott, Anthony, 2002. "Are preferences stable? The case of health care," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 1-14, May.
    17. Alston, Julian M. & Chalfant, James A. & Christian, Jason E. & Meng, Erika & Piggott, Nicholas E., 1996. "Evaluating The California Table Grape Commission's Promotion Program: Overview and Summary," Economic Evaluation of Commodity Promotion Programs in the Current Legal and Political Environment, October 7-8, 1996, Monterey, California 279660, Regional Research Projects > NECC-63: Research Committee on Commodity Promotion.
    18. Julian Alston & James Chalfant & Nicholas Piggott, 2002. "Estimating and testing the compensated double-log demand model," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1177-1186.
    19. Chalfant, James A. & Eshel, Dafna M. Disegni, 2001. "A Nonparametric Test Of Advertising'S Effectiveness," 2001 Annual meeting, August 5-8, Chicago, IL 20529, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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