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The Almost Ideal Demand System Approximation and Separability

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  • Brown, Mark G.
  • Lee, Jonq-Ying

Abstract

The paper focuses on separability in the almost ideal demand system (AIDS) in time series analysis. The AIDS approximation based on Stone's price index is specified in terms of the Rotterdam model and block additivity is imposed for illustrative purposes. A generalization to other types of separability is then considered. The model can be viewed as an extension to Theil et al.'s Working-PI time series model. In both the Theil et al. model and the AIDS model examined here, the marginal propensity to spend on a good is allowed to depend on the good's budget share. In the model in this paper, the Slutsky coefficients are further allowed to depend on the budget shares. The model provides a consistent way to analyze subgroup demand relationships.

Suggested Citation

  • Brown, Mark G. & Lee, Jonq-Ying, 1990. "The Almost Ideal Demand System Approximation and Separability," Research papers 52711, Florida Department of Citrus.
    • Handle: RePEc:ags:fdcrrp:52711
    DOI: 10.22004/ag.econ.52711
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    Keywords

    Demand and Price Analysis;

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