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Effective global regularity and empirical modelling of direct, inverse, and mixed demand systems

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  • Keith R. McLaren
  • K.K. Gary Wong

Abstract

This paper utilizes the notion of `effective global regularity' and the intuition stemming from Cooper and McLaren (1996)'s General Exponential Form to develop a family of `composite' (product and ratio) direct, inverse and mixed demand systems. Apart from having larger regularity regions, the resulting specifications are also of potentially arbitrary rank, which can better approximate non-linear Engel curves. We also make extensive use of duality theory and a numerical inversion estimation method to rectify the endogeneity problem encountered in the estimation of the mixed demand systems. We illustrate the techniques by estimating different types of demand systems for Japanese quarterly meat and fish consumption.

Suggested Citation

  • Keith R. McLaren & K.K. Gary Wong, 2009. "Effective global regularity and empirical modelling of direct, inverse, and mixed demand systems," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 749-770, May.
    • Handle: RePEc:cje:issued:v:42:y:2009:i:2:p:749-770
    DOI: 10.1111/j.1540-5982.2009.01526.x
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    Citations

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    Cited by:

    1. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Timothy Graciano & Scott Colby, 2012. "Intertemporal Risk Management in Agriculture," Monash Economics Working Papers 16-12, Monash University, Department of Economics.
    2. H. Youn Kim & José Alberto Molina & K. K. Gary Wong, 2025. "Shadow demands for unobservable goods: an intertemporal incomplete demand approach," Empirical Economics, Springer, vol. 69(1), pages 149-179, July.
    3. H. Youn Kim & Keith R. McLaren & K.K. Gary Wong, 2014. "Consumer Demand, Consumption, and Asset Pricing: An Integrated Analysis," Monash Econometrics and Business Statistics Working Papers 4/14, Monash University, Department of Econometrics and Business Statistics.
    4. K. K. Gary Wong & Hoanjae Park, 2018. "Consumption dynamics in inverse demand systems: an application to meat and fish demand in Korea," Agricultural Economics, International Association of Agricultural Economists, vol. 49(6), pages 777-786, November.
    5. H. Youn Kim & José Alberto Molina & Ka Kei Gary Wong, 2022. "Durable Goods and Consumer Behavior with Liquidity Constraints: Evidence from Norway," Boston College Working Papers in Economics 1047, Boston College Department of Economics.
    6. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 143-186, National Bureau of Economic Research, Inc.
    7. K. K. G. Wong, 2013. "Trade distance functions and the derivation of inverse demand for imports," Applied Economics, Taylor & Francis Journals, vol. 45(29), pages 4160-4168, October.
    8. Jeffrey LaFrance & Rulon Pope, 2008. "The Generalized Quadratic Expenditure System," Working Papers 2008-27, School of Economic Sciences, Washington State University.
    9. Keith R. McLaren & Ou Yang, 2014. "A Class of Demand Systems Satisfying Global Regularity and Having Complete Rank Flexibility," Monash Econometrics and Business Statistics Working Papers 6/14, Monash University, Department of Econometrics and Business Statistics.
    10. H. Kim & Keith McLaren & K. Wong, 2013. "Empirical demand systems incorporating intertemporal consumption dynamics," Empirical Economics, Springer, vol. 45(1), pages 349-370, August.
    11. H. Youn Kim & Keith R. McLaren & K. K. Gary Wong, 2020. "Valuation of public goods: an intertemporal mixed demand approach," Empirical Economics, Springer, vol. 59(5), pages 2223-2253, November.
    12. LaFrance, Jeffrey T., 2008. "The structure of US food demand," Journal of Econometrics, Elsevier, vol. 147(2), pages 336-349, December.
    13. H. Youn Kim & José Alberto Molina & K. K. Gary Wong, 2024. "Durable goods and consumer behavior with liquidity constraints," Scandinavian Journal of Economics, Wiley Blackwell, vol. 126(1), pages 155-193, January.
    14. Kim, H．Youn & Wong, K．K．Gary, 2025. "Food demand and intertemporal allocation of food expenditure," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 656-674.
    15. Eldon V. Ball & Ricardo Cavazos & Jeffrey T. LaFrance & Rulon Pope & Jesse Tack, 2010. "Aggregation and Arbitrage in Joint Production," Monash Economics Working Papers archive-22, Monash University, Department of Economics.
    16. Ingvild Almas & Ashild Johnsen, 2018. "The cost of a growth miracle - reassessing price and poverty trends in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 239-264, October.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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