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Linear estimation of the nonlinear almost ideal demand system: a Monte Carlo study

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  • Guang Wan

Abstract

Most applied economists use the almost ideal demand system or AIDS to model demand without knowing the consequences of alternative estimation procedures. In this paper, Monte Carlo experiments are undertaken to evaluate the performance of several estimation methods of AIDS. Based on the measures of trace mean squared error and aggregate bias, the iterative procedure proposed by Deaton and Muellbauer (1980) is found to dominate.

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  • Guang Wan, 1998. "Linear estimation of the nonlinear almost ideal demand system: a Monte Carlo study," Applied Economics Letters, Taylor & Francis Journals, vol. 5(3), pages 181-186.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:3:p:181-186
    DOI: 10.1080/758521378
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    References listed on IDEAS

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