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Generalized Habit Formation in an Inverse Almost Ideal Demand System: An Application to Meat Expenditures in the U.S

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  • Holt, Matthew T
  • Goodwin, Barry K

Abstract

The Inverse Almost Ideal Demand System (IAIDS) model of Moschini and Vissa (1992) and Eales and Unnevehr (1994) is extended to include: (1) general, nonlinear, nonadditive habit effects; and (2) a specification for habit stock terms that allow purchases from the distant past to influence current consumption (long memory). The resulting models are compared with a linear habit effects model and a static specification. The empirical estimation is on U.S. quarterly meat expenditures (1961-1993), with each model being subjected to a battery of misspecification tests. Results of these tests, along with tests of homogeneity and symmetry restrictions, indicate clearly that the most generalized dynamic specification--the one with nonlinear, nonadditive long-memory habit stock effects--is preferred. Furthermore, persistence effects are found to be qualitatively important in that flexibility, consumption scale, and habit flexibility estimates differ, in some instances substantially, between alternative specifications.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 22 (1997)
Issue (Month): 2 ()
Pages: 293-320

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Handle: RePEc:spr:empeco:v:22:y:1997:i:2:p:293-320

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Cited by:
  1. Karagiannis, G. & Katranidis, S. & Velentzas, K., 2000. "An error correction almost ideal demand system for meat in Greece," Agricultural Economics, Blackwell, vol. 22(1), pages 29-35, January.
  2. Beach, Robert H. & Zhen, Chen, 2009. "Consumer Purchasing Behavior in Response to Media Coverage of Avian Influenza," 2009 Conference, August 16-22, 2009, Beijing, China 51742, International Association of Agricultural Economists.
  3. Holt, Matthew T. & Balagtas, Joseph V., 2009. "Estimating Structural Change with Smooth Transition Regressions: an Application to Meat Demand," MPRA Paper 15331, University Library of Munich, Germany.
  4. Hilmer, Christiana E. & Holt, Matthew T., 1999. "The Almost Ideal Supply System And Agricultural Production In The United States," 1999 Annual meeting, August 8-11, Nashville, TN 21659, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Marsh, Thomas L., 2003. "Elasticities for U.S. Wheat Food Use by Class," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57920, Australian Agricultural and Resource Economics Society.
  6. Dorfman, Jeffrey H. & Karali, Berna, 2008. "Do Farmers Hedge Optimally or by Habit? A Bayesian Partial-Adjustment Model of Farmer Hedging," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37596, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  7. Zhen, Chen & Wohlgenant, Michael K., 2006. "Food Safety and Habits in U.S. Meat Demand under Rational Expectations," 2006 Annual meeting, July 23-26, Long Beach, CA 21287, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Yeboah, Godfred & Maynard, Leigh J., 2004. "The Impact Of Bse, Fmd, And U.S. Export Promotion Expenditures On Japanese Meat Demand," 2004 Annual meeting, August 1-4, Denver, CO 19978, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Piggott, Nicholas E., 2006. "Consumer Price Formation with Demographic Translating," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25252, International Association of Agricultural Economists.
  10. Marsh, Thomas L., 2005. "Economic substitution for US wheat food use by class," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(3), September.
  11. Goodwin, Barry K. & Harper, Daniel C. & Schnepf, Randall D., 2000. "Short-Run Demand Relationships In The U.S. Fats And Oils Complex," 2000 Conference, April 17-18 2000, Chicago, Illinois 18942, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  12. Silva, Andres & Dharmasena, Senarath, 2013. "Modeling Seasonal Unit Roots as a Simple Empirical Method to Handle Autocorrelation in Demand Systems: Evidence from UK Expenditure Data," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149928, Agricultural and Applied Economics Association.
  13. Karagiannis, G. & Katranidis, S. & Velentzas, K., 2000. "An error correction almost ideal demand system for meat in Greece," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 22(1), January.

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