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A Modified, Implicit, Directly Additive Demand System

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  • Cranfield, John A.L.
  • Preckel, Paul V.
  • Hertel, Thomas W.

Abstract

A recently developed demand system, nicknamed AIDADS, offers a more general approach to capturing consumption preferences. AIDADS generalizes the LES by assuming marginal budget shares vary indirectly with expenditure. AIDADS is limited by the fact that the subsistence parameters are constant across expenditure. We modify AIDADS by replacing the constant subsistence parameters with a function which varies with utility, and hence expenditure. The modified AIDADS (MAIDADS) allows subsistence levels to vary with expenditure. This model is applied to the 1996 International Consumption Project data. As these data span a wide range of expenditure levels, MAIDADS offers a viable alternative when estimating "global demand systems." Results suggest subsistence values for livestock and other food products vary with expenditure, while those for grain are constant across expenditure.

Suggested Citation

  • Cranfield, John A.L. & Preckel, Paul V. & Hertel, Thomas W., 2005. "A Modified, Implicit, Directly Additive Demand System," Working Papers 34145, University of Guelph, Department of Food, Agricultural and Resource Economics.
    • Handle: RePEc:ags:uguewp:34145
    DOI: 10.22004/ag.econ.34145
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    Cited by:

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    2. Christophe Gouel & Houssein Guimbard, 2019. "Nutrition Transition and the Structure of Global Food Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(2), pages 383-403.
    3. Christophe Gouel & Houssein Guimbard, 2018. "Nutrition Transition and the Structure of Global Food Demand," Post-Print hal-01820555, HAL.
    4. Yang, Anton C. & Gouel, Christophe & Hertel, Thomas W., 2018. "Will Income or Population be the Main Driver of Food Demand Growth to 2050?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274146, Agricultural and Applied Economics Association.
    5. Fukase, Emiko & Martin, Will, 2020. "Economic growth, convergence, and world food demand and supply," World Development, Elsevier, vol. 132(C).
    6. Aguiar, Angel & Corong, Erwin & van der Mensbrugghe, Dominique, 2020. "The GTAP Recursive Dynamic (GTAP-RD) Model: Version 1.0," Conference papers 333133, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.

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    Demand and Price Analysis;

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