Regular and Estimable Inverse Demand Systems: A Distance Function Approach
AbstractTo be useful for realistic policy simulation in an environment of rapid structural change, inverse demand systems must remain regular over substantial variations in quantities. The distance function is a convenient vehicle for generating such systems. While it directly yields Hicksian inverse demand functions, those functions will not usually have an explicit representation in terms of the observable variables. Note however that this problem need not hinder estimation and could be solved by using the numerical inversion estimation approach. This paper develops the formal theory for using distance functions in this context, and demonstrates the operational feasibility of the method.
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Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 6/02.
Length: 32 pages
Date of creation: Jul 2002
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Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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- NEP-ALL-2002-07-31 (All new papers)
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