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A Class of Demand Systems Satisfying Global Regularity and Having Complete Rank Flexibility

  • Keith R. McLaren


  • Ou Yang


A class of demand systems based on simple parametric specification of the indirect utility functions, but allowing for the parsimonious imposition of global regularity, is proposed. Demand systems in this class are completely flexible in rank, i.e., can be potentially specified to acquire as large a rank as required in empirical work. They also exhibit a clear and reasonable homothetic asymptotic behaviour. In an empirical application using Australian data, several examples from this class are estimated and compared with some popular alternatives in the literature.

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Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 6/14.

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Length: 28
Date of creation: 2014
Date of revision:
Handle: RePEc:msh:ebswps:2014-6
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  8. Lewbel, Arthur, 1987. "Fractional demand systems," Journal of Econometrics, Elsevier, vol. 36(3), pages 311-337, November.
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  15. 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.
  16. Keith R. McLaren & K.K. Gary Wong, 2009. "Effective global regularity and empirical modelling of direct, inverse, and mixed demand systems," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 749-770, May.
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