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Using an Almost Ideal Demand System in a Macro-Micro Modelling Context to Analyse Poverty and Inequalities

  • Luc Savard


    (Professeur, GREDI, Département d’économique, Faculté d’administration, Université de Sherbrooke, Sherbrooke, Québec, Canada)

In this paper, we explore the contribution of introducing a flexible form for household consumption in a macro-micro modelling context for poverty and income distribution analysis. The almost ideal demand system exhibits interesting features allowing for the introduction of inter-household heterogeneity in a rigorous fashion. In order to illustrate the contribution of the AIDS system in the macro-micro modelling context, we perform a comparative analysis with an equivalent model using a LES demand system and a CGE with representative households including an AIDS. Results show the strong contribution of using an almost ideal demand system in a microsimulation context and its value added versus a linear expenditure system to analyse poverty and income distribution changes following a policy simulation.

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Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 10-04.

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Length: 28 pages
Date of creation: 04 Feb 2010
Date of revision:
Handle: RePEc:shr:wpaper:10-04
Contact details of provider: Postal: Sherbrooke, Québec, J1K 2R1
Phone: (819) 821-7233
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  1. François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," Working Papers DT/2003/10, DIAL (Développement, Institutions et Mondialisation).
  2. Luc Savard, 2004. "Poverty and Inequality Analysis within a CGE Framework: a Comparative Analysis of the Representative Agent and Micro-Simulation Approaches," Cahiers de recherche 0412, CIRPEE.
  3. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Economics Series Working Papers WPS/2002-11, University of Oxford, Department of Economics.
  4. André Decoster & Frederic Vermeulen, 1998. "Evaluation of the empirical performance of two-stage budgeting AIDS, QUAIDS and Rotterdam models based on weak separability," Public Economics Working Paper Series ces9807, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  5. Nichele, Veronique & Robin, Jean-Marc, 1995. "Simulation of indirect tax reforms using pooled micro and macro French data," Journal of Public Economics, Elsevier, vol. 56(2), pages 225-244, February.
  6. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-15, July.
  7. Maurizio Bussolo & Jann Lay, 2003. "Globalisation and Poverty Changes in Colombia," OECD Development Centre Working Papers 226, OECD Publishing.
  8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  9. Decoster, Andre & Schokkaert, Erik, 1990. "Tax reform results with different demand systems," Journal of Public Economics, Elsevier, vol. 41(3), pages 277-296, April.
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