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Measuring An Almost Ideal Demand System With Generalized Flexible Least Squares

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Author Info

  • Poray, Michael C.
  • Foster, Kenneth A.
  • Dorfman, Jeffrey H.

Abstract

Structural change in meat consumption has been the focus of many researchers during the last two decades. In this paper we develop a dynamic linear Almost Ideal Demand System (AIDS) model from a cost function that allows for time varying parameters. This model is consistent with inertia in the parameters of the cost and indirect utility functions. It allows for persistent preferences which may arise from cultural biases, lifestyles, peer pressure, etc. An empirical application is conducted with US meat consumption and price data using a generalized system of flexible least squares, Generalized Flexible Least Squares (GFLS). GFLS allows parameters to evolve slowly over time through incorporating of penalties in fluctuations. Estimated quarterly elasticities were subjected to additional analysis to determine how highly they were related to the Brown and Schrader Cholesterol Index and relative prices. The combined results support that the movements of elasticities over time are related to both.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2000 Annual meeting, July 30-August 2, Tampa, FL with number 21796.

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Date of creation: 2000
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Handle: RePEc:ags:aaea00:21796

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Keywords: Demand and Price Analysis; Institutional and Behavioral Economics;

References

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  1. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
  2. Tesfatsion, L. & Veitch, J., 1988. "U.S. Money Demand Instability: A Flexible Least Squares Approach," Papers m8809, Southern California - Department of Economics.
  3. Kalaba, Robert E. & Tesfatsion, Leigh S., 1989. "Time-Varying Linear Regression Via Flexible Least Squares," Staff General Research Papers 11196, Iowa State University, Department of Economics.
  4. Moschini, GianCarlo, 1991. "Testing for Preference Change in Consumer Demand: An Indirectly Separable, Semiparametric Model," Staff General Research Papers 11261, Iowa State University, Department of Economics.
  5. Dorfman, Jeffrey H. & Foster, Kenneth A., 1991. "Estimating Productivity Changes With Flexible Coeficients," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(02), December.
  6. 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(01), July.
  7. Binswanger, Hans P, 1974. "The Measurement of Technical Change Biases with Many Factors of Production," American Economic Review, American Economic Association, vol. 64(6), pages 964-76, December.
  8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  9. Moschini, GianCarlo & Meilke, Karl D., 1989. "Modeling the Pattern of Structural Change in U.S. Meat Demand," Staff General Research Papers 11266, Iowa State University, Department of Economics.
  10. Moschini, GianCarlo & Meilke, Karl D., 1984. "Parameter Stability And The U.S. Demand For Beef," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 9(02), December.
  11. Chalfant, James A & Alston, Julian M, 1988. "Accounting for Changes in Tastes," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 391-410, April.
  12. Chalfant, James A, 1987. "A Globally Flexible, Almost Ideal Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 233-42, April.
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Cited by:
  1. Schroeter, Christiane & Foster, Kenneth A., 2004. "The Impact Of Health Information And Demographic Changes On Aggregate Meat Demand," 2004 Annual meeting, August 1-4, Denver, CO 20130, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Brinker, Adam J. & Parcell, Joseph L. & Dhuyvetter, Kevin C., 2007. "Cross-Hedging Distillers Dried Grains: Exploring Corn and Soybean Meal Futures Contracts," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37567, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  3. Kuethe, Todd H. & Foster, Kenneth A. & Florax, Raymond J.G.M., 2008. "A Spatial Hedonic Model with Time-Varying Parameters: A New Method Using Flexible Least Squares," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6306, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Parcell, Joseph L., 2003. "An Empirical Analysis of the Demand for Wholesale Pork Primals: Seasonality and Structural Change," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(02), August.
  5. Hubbs, Todd & Kuethe, Todd H. & Baker, Timothy G., 2009. "Evaluating the Dynamic Nature of Market Risk," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53037, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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