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The Informational Fit and Maximum Likelihood in a Pooled Cross-Country Demand System with Autocorrelation

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  • Chen, Dongling
  • Seale, James L., Jr.

Abstract

We fit the Florida Model with an AR(1) error structure to pooled cross-country International Comparison Project (ICP) data of Seale, Walker, and Kim and estimate the model with the minimum information (MI) estimator. Point estimates obtained by MI are similar in value to those obtained by Seale, Walker, and Kim with maximum likelihood (ML). Two similar simulations but with different sample sizes are conducted to compare the relative efficiencies of MI and ML with known and unknown (MLU) covariances. In the larger sample, the MLU is more efficient in terms of root-mean-squared errors (RMSEs) than the MI. Noteworthy, in the small sample, the MI is more efficient in terms of RMSEs than MLU, even though MLU explicitly accounts for AR(1), whereas the MI does not. These results correspond to earlier findings of Theil for time-series and cross-sectional data.

Suggested Citation

  • Chen, Dongling & Seale, James L., Jr., 2003. "The Informational Fit and Maximum Likelihood in a Pooled Cross-Country Demand System with Autocorrelation," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(Supplemen), pages 1-7.
    • Handle: RePEc:ags:joaaec:43294
    DOI: 10.22004/ag.econ.43294
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    References listed on IDEAS

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    1. Flood, Lennart R. & Finke, Renate & Theil, Henri, 1984. "Maximum likelihood and minimum information estimation of allocation models with fat-tailed error distributions," Economics Letters, Elsevier, vol. 16(3-4), pages 213-218.
    2. Seale, James Jr. & Walker, Wayne E. & Kim, In-Moo, 1991. "The demand for energy : Cross-country evidence using the Florida model," Energy Economics, Elsevier, vol. 13(1), pages 33-40, January.
    3. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
    4. Keller, W.J. & Van Driel, J., 1985. "Differential consumer demand systems," European Economic Review, Elsevier, vol. 27(3), pages 375-390.
    5. Theil, Henri & Finke, Renate & Flood, Lennart R., 1984. "Minimum information estimation of allocation models," Economics Letters, Elsevier, vol. 15(3-4), pages 251-256.
    6. Finke, Renate & Theil, Henri, 1984. "An extended version of minimum information estimation of allocation models," Economics Letters, Elsevier, vol. 15(3-4), pages 229-233.
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