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Testing Homogeneity in the Linearized Almost Ideal Demand System

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  • Adolf Buse

Abstract

The behavior of exact tests for homogeneity (F and Hotelling T-super-2) is compared with size-adjusted LR tests in the linearized AIDS model with different approximating price indexes (Stone, Paasche, Laspeyres). The Monte Carlo evidence shows that test size distortions are sensitive to the correlation structure of prices, the time-series properties of the data, and the choice of price index. None of the results explains the persistent over-rejection of homogeneity in applied work. Copyright 1998, Oxford University Press.

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  • Adolf Buse, 1998. "Testing Homogeneity in the Linearized Almost Ideal Demand System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 208-220.
  • Handle: RePEc:oup:ajagec:v:80:y:1998:i:1:p:208-220
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    File URL: http://hdl.handle.net/10.2307/3180282
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    1. Meyerhoefer, Chad D. & Ranney, Christine K. & Sahn, David E., 2004. "Consistent Estimation Of Longitudinal Censored Demand Systems," 2004 Annual meeting, August 1-4, Denver, CO 19992, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. LaFrance, J. T. & Beatty, T. K. M. & Pope, R. D. & Agnew, G. K., 2002. "Information theoretic measures of the income distribution in food demand," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 235-257, March.
    3. Chen, Kevin Z., 1998. "The symmetric problem in the linear almost ideal demand system," Economics Letters, Elsevier, vol. 59(3), pages 309-315, June.
    4. repec:sbe:breart:v:23:y:2003:i:2:a:2726 is not listed on IDEAS
    5. Chia-Lin Chang & Thanchanok Khamkaew & Michael McAleer, 2010. "Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia," CIRJE F-Series CIRJE-F-735, CIRJE, Faculty of Economics, University of Tokyo.
    6. Denni Tommasi, 2016. "Household Responses to cash Transfers," Working Papers ECARES ECARES 2016-20, ULB -- Universite Libre de Bruxelles.
    7. Chang, Hui-Shung (Christie), 2000. "An econometric analysis of the competitive position of Australian cotton in the Japanese market," Working Papers 12940, University of New England, School of Economics.
    8. Christopher J. O'Donnell & Alicia N. Rambaldi & Howard E. Doran, 2001. "Estimating economic relationships subject to firm- and time-varying equality and inequality constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 709-726.
    9. repec:ebl:ecbull:v:3:y:2008:i:14:p:1-10 is not listed on IDEAS
    10. Tiffin, J. Richard & Balcombe, Kelvin George, 2003. "Testing Symmetry And Homogeneity In The Aids With Cointegrated Data Using Fully-Modified Estimation And The Bootstrap," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25845, International Association of Agricultural Economists.
    11. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September.
    12. Manami Ogura, 2008. "The examination of the validity of the Divisia price index for the almost ideal demand system model: Some Monte Carlo results," Economics Bulletin, AccessEcon, vol. 3(14), pages 1-10.
    13. Dhar, Tirtha & Chavas, Jean-Paul & Cotterill, Ronald W. & Gould, Brian W., 2002. "An Econometric Analysis of Brand Level Strategic Pricing Between Coca Cola and Pepsi Inc," Working Papers 201553, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    14. Karel Janda & Jill J. McCluskey & Gordon C. Rausser, 2000. "Food Import Demand in the Czech Republic," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(1), pages 22-44.
    15. O'Donnell, Christopher J., 2000. "Estimating The Characteristics Of Homogeneous Functionsusing Flexible Functional Forms," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123713, Australian Agricultural and Resource Economics Society.
    16. Ou Yang & Peter Sivey & Andrea M. de Silva & Anthony Scott, 2016. "Preschool Children’s Demand for Sugar Sweetened Beverages: Evidence from Stated-Preference Panel Data," Melbourne Institute Working Paper Series wp2016n25, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    17. LaFrance, Jeffrey T. & Beatty, Timothy K. M. & Pope, Rulon D., 2004. "Building Gorman's Nest," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2ws698td, Department of Agricultural & Resource Economics, UC Berkeley.
    18. Holt, Matthew T. & Goodwin, Barry K., 2009. "The Almost Ideal and Translog Demand Systems," MPRA Paper 15092, University Library of Munich, Germany.
    19. Chang, Hui-Shung (Christie) & Nguyen, Chi, 2002. "The elasticity of demand for Australian cotton in Japan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(1), March.
    20. Ken-ichi Mizobuchi & Hisashi Tanizaki, 2014. "On estimation of almost ideal demand system using moving blocks bootstrap and pairs bootstrap methods," Empirical Economics, Springer, vol. 47(4), pages 1221-1250, December.
    21. Chang, Hui-Shung (Christie) & Bettington, Nicholas, 2001. "Demand for Wine in Australia: Systems Versus Single Equation Approach," Working Papers 12923, University of New England, School of Economics.
    22. Meyerhoefer, Chad D. & Ranney, Christine K. & Sahn, David E., 2003. "Consistent Estimation Of Longitudinal Censored Demand Systems: An Application To Transition Country Data," Working Papers 127252, Cornell University, Department of Applied Economics and Management.

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