Share equations for the translog and almost ideal demand systems are estimated using Markov Chain Monte Carlo. A common prior on the elasticities and budget shares evaluated at average prices and income is used for both models. It includes equality restrictions (homogeneity, adding up and symmetry) and inequality restrictions (monotonicity and concavity). Posterior densities on the elasticities and shares are obtained; the problem of choosing between the results from the two alternative functional forms is resolved by using Bayesian model averaging. The application is to USDA data for beef, pork and poultry. Estimation of elasticities and shares, evaluated at mean prices and expenditure, is insensitive to model choice. At points away from the means the estimates are sensitive, and model averaging has an impact.
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Length: 34 pages Date of creation: 2001 Date of revision: Handle: RePEc:mlb:wpaper:806
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Find related papers by JEL classification: C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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