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A Modified, Implicit, Directly Additive Demand System

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

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.

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Paper provided by University of Guelph, Department of Food, Agricultural and Resource Economics in its series Working Papers with number 34145.

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Date of creation: 2005
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Handle: RePEc:ags:uguewp:34145
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  1. Alan A. Powell & Keith R. McLaren & K.R. Pearson & Maureen T.Rimmer, 2002. "Cobb-Douglas Utility - Eventually!," Centre of Policy Studies/IMPACT Centre Working Papers ip-80, Victoria University, Centre of Policy Studies/IMPACT Centre.
  2. Arthur Lewbel, 2000. "A Rational Rank Four Demand System," Boston College Working Papers in Economics 463, Boston College Department of Economics, revised 04 Apr 2003.
  3. John Cranfield & Paul Preckel & James Eales & Thomas Hertel, 2000. "On the estimation of 'an implicitly additive demand system'," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1907-1915.
  4. Howe, Howard & Pollak, Robert A & Wales, Terence J, 1979. "Theory and Time Series Estimation of the Quadratic Expenditure System," Econometrica, Econometric Society, vol. 47(5), pages 1231-47, September.
  5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  6. Hanoch, Giora, 1975. "Production and Demand Models with Direct or Indirect Implicit Additivity," Econometrica, Econometric Society, vol. 43(3), pages 395-419, May.
  7. David L. Ryan & Terence J. Wales, 1999. "Flexible And Semiflexible Consumer Demands With Quadratic Engel Curves," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 277-287, May.
  8. Russel J. Cooper & Keith R. McLaren, 1992. "An Empirically Oriented Demand System with Improved Regularity Properties," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 652-68, August.
  9. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2002. "Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model," Journal of Development Economics, Elsevier, vol. 68(2), pages 289-307, August.
  10. Gamaletsos, Theodore, 1973. "Further analysis of cross-country comparison of consumer expenditure patterns," European Economic Review, Elsevier, vol. 4(1), pages 1-20, April.
  11. Maureen T. Rimmer & Alan A. Powell, 1992. "An Implicitly Directly Additive Demand System: Estimates for Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-73, Victoria University, Centre of Policy Studies/IMPACT Centre.
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