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Maintaining parameter invariance in seemingly unrelated regressions estimation

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  • Jay Lillywhite
  • Paul Preckel
  • James Eales

Abstract

Seemingly unrelated regressions (SUR) is an important estimation methodology in demand analysis. While possessing qualities that make it attractive to applied demand analysts, the SUR estimation technique poses several difficulties, including the lack of parameter invariance in some instances e.g. estimation of consumer demand systems with micro-level data. When data includes zero consumption, corrections used to account for censoring may result in different parameter estimates when different share equations are dropped for estimation. This article proposes an alternative estimation objective which results in invariant parameter estimates when imposing adding-up by dropping equations.

Suggested Citation

  • Jay Lillywhite & Paul Preckel & James Eales, 2008. "Maintaining parameter invariance in seemingly unrelated regressions estimation," Applied Economics Letters, Taylor & Francis Journals, vol. 15(5), pages 405-409.
    • Handle: RePEc:taf:apeclt:v:15:y:2008:i:5:p:405-409
    DOI: 10.1080/13504850600706156
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    References listed on IDEAS

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    3. BARTEN, Anton P., 1969. "Maximum likelihood estimation of a complete system of demand equations," LIDAM Reprints CORE 34, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    5. Steven T. Yen & Biing-Hwan Lin & David M. Smallwood, 2003. "Quasi- and Simulated-Likelihood Approaches to Censored Demand Systems: Food Consumption by Food Stamp Recipients in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 458-478.
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