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Alternative Estimation Methods Of Nonlinear Demand Systems

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  • Capps, Oral, Jr.

Abstract

Several contemporary models of consumer demand comprise complete sets on nonlinear demand functions. Estimation methods should take into account parameter nonlinearity, cross-equation correlation, variance-covariance singularity of the disturbance terms, and various parameter restrictions. This paper presents a theoretical discussion and some empirical results using the maximum likelihood (ML) method and the iterative version of Zellner's seemingly unrelated regression (IZEF) method in the estimation of a nonlinear system of demand equations (the linear expenditure system) when the disturbance terms are both contemporaneously and serially correlated. On the basis of the evaluation of parameter estimates and their asymptotic standard errors as well as the cost of computation effort, the IZEF technique is preferred over the ML technique in this empirical problem.

Suggested Citation

  • Capps, Oral, Jr., 1983. "Alternative Estimation Methods Of Nonlinear Demand Systems," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 8(01), pages 1-14, July.
    • Handle: RePEc:ags:wjagec:32484
    DOI: 10.22004/ag.econ.32484
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    References listed on IDEAS

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    1. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
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    Cited by:

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    2. Menkhaus, Dale J. & St. Clair, James S. & Hallingbye, Stig, 1985. "A Reexamination Of Consumer Buying Behavior For Beef, Pork, And Chicken," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 10(01), pages 1-10, July.
    3. Gharibnavaz, M. Reza & Waschik, Robert, 2012. "A General Equilibrium Analysis of Alternative Scenarios for Food and Energy Subsidy Reforms in Iran," Conference papers 332241, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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