A comment on consumer demand systems with binding non-negativity constraints
Wales and Woodland (1983) have proposed an econometric model to deal with non-negativity constraints in systems of demand equations. This paper points out the relationship between the Walesâ€”Woodland model and the "simultaneous Tobit" model of Amemiya (1974). This relationship is important because Amemiya has proposed a simple estimation procedure that can be utilized for some cases of the Walesâ€”Woodland model. The issue of internal consistency for models of this type is discussed. I point out that internal consistency for the Walesâ€”Woodland model is equivalent to the second order condition for systems without quantity constraints.
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