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Evaluation of the empirical performance of two-stage budgeting AIDS, QUAIDS and Rotterdam models based on weak separability

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  • André Decoster
  • Frederic Vermeulen

Abstract

Microsimulation models for indirect taxation require detailed underlying demand systems, in order to be policy relevant. A possible solution for the econometric problem (lack of necessary degrees of freedom) is the separability concept and the closely related notion of two-stage budgeting. In this paper, weak separability is applied on the Almost Ideal Demand System (AIDS), its quadratic extension QUAIDS and the Rotterdam model. These two-stage budgeting demand systems were estimated on Belgian time series data and were evaluated by means of a comparison of their elasticities (both partial and total), goodness-of-fit measures and their forecasting accuracy. Though the rank three QUAIDS model does not dominate the others in every respect (at least for time series data), it has nice theoretical properties which can on their own be a justification for the use of the system.

Suggested Citation

  • André Decoster & Frederic Vermeulen, 1998. "Evaluation of the empirical performance of two-stage budgeting AIDS, QUAIDS and Rotterdam models based on weak separability," Public Economics Working Paper Series ces9807, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    • Handle: RePEc:wpe:papers:ces9807
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    Cited by:

    1. Ole Boysen, 2016. "Food Demand Characteristics in Uganda: Estimation and Policy Relevance," South African Journal of Economics, Economic Society of South Africa, vol. 84(2), pages 260-293, June.
    2. Harding, Matthew & Lovenheim, Michael, 2017. "The effect of prices on nutrition: Comparing the impact of product- and nutrient-specific taxes," Journal of Health Economics, Elsevier, vol. 53(C), pages 53-71.
    3. Luc Savard, 2010. "Using an Almost Ideal Demand System in a Macro-Micro Modelling Context to Analyse Poverty and Inequalities," Cahiers de recherche 10-04, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    4. Luc Savard, 2004. "Un système de demandes AIDS dans un contexte EGC microsimulation pour l'analyse de pauvreté et des inégalités," Cahiers de recherche 04-10, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    5. Hoa K. Hoang, 2018. "Analysis of food demand in Vietnam and short†term impacts of market shocks on quantity and calorie consumption," Agricultural Economics, International Association of Agricultural Economists, vol. 49(1), pages 83-95, January.
    6. Ana Gil & José Molina, 2009. "Alcohol demand among young people in Spain: an addictive QUAIDS," Empirical Economics, Springer, vol. 36(3), pages 515-530, June.
    7. Julien Boelaert, 2013. "A Neural Network Demand System," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00917810, HAL.
    8. Julien Boelaert, 2013. "A Neural Network Demand System," Documents de travail du Centre d'Economie de la Sorbonne 13081, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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