Deriving a Flexible Mixed Demand System: The Normalized Quadratic Model
This article deals with the specification of a locally flexible and theory-consistent system of mixed demand functions, a framework that allows for a rich set of possibilities about what is assumed as exogenous in a demand model. A coherent mixed demand system is derived by using the restricted expenditure function typically studied in the related area of rationed demands. The method is implemented by a new normalized quadratic (NQ) parameterization of the restricted expenditure function. The resulting NQ mixed demand system is illustrated with an application to a nine-good model of the Italian demand for vegetables. Copyright 2007, Oxford University Press.
Volume (Year): 89 (2007)
Issue (Month): 4 ()
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