Demographics and demand: Evaluation of alternative functional forms
We evaluate the role of functional form of demographics in demand analysis by proposing the GQL ‘unstructured’ demographically transformed model which nests the Barten–Gorman demographically modified model and popular rank-3 and rank-2 demand systems. We use UK individual data and find that the equivalence of the ‘unstructured’ and Barten–Gorman forms and identification of meaningful equivalence scales depend on the degree of flexibility of the demand system in demographic, price and income effects.
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