Tricks with Hicks: Stata GMM code for nonlinear gmm
In a June, 2009 American Economic Review article entitled "Tricks with Hicks: The EASI Demand System", Arthur Lewbel and Krishna Pendakur proposed the exact affine Stone index demand system. This system allows Engel curve behavior higher than rank 3, demographics, and unobserved heterogeneity in tastes. The AEA web supplement for the article provides Stata code to estimate a linear, and iterative linear version of the model. But the full nonlinear system instrumental variable estimates were obtained with TSP econometric software using command frml to obtain nonlinear 3SLS estimates. I present Stata code to estimate the nonlinear EASI demand system using the Stata gmm command. This is an example of the important estimation extensions that have been made possible by the introduction of the gmm command.
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