The Stone index typically used in estimating linear almost ideal demand systems is not invariant to changes in units of measurement, which may seriously affect the approximation properties of the model. A modification to the Stone index, or use of a regular price index instead, are both desirable practices in estimating linear AI models.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
5058.
Length: Date of creation: 01 Mar 2002 Date of revision: Publication status: Published in American Journal of Agricultural Economics, February 1995, Vol. 77, No. 1, pp. 63-68. Handle: RePEc:isu:genres:5058
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