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

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Listed:
  • Luc Savard

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

Abstract

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.

Suggested Citation

  • Luc Savard, 2010. "Using an Almost Ideal Demand System in a Macro-Micro Modelling Context to Analyse Poverty and Inequalities," Cahiers de recherche 10-04, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
  • Handle: RePEc:shr:wpaper:10-04
    as

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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-1004.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
    2. Luc Savard, 2005. "Poverty and Inequality Analysis within a CGE Framework: A Comparative Analysis of the Representative Agent and Microsimulation Approaches," Development Policy Review, Overseas Development Institute, vol. 23(3), pages 313-331, May.
    3. André Decoster & Frederic Vermeulen, "undated". "Evaluation of the Empirical Performance of Two-Stage Budgeting AIDS, QUAIDS and Rotterdam Models Based on Weak Separability," Working Papers Department of Economics ces9807, KU Leuven, Faculty of Economics and Business, Department of Economics.
    4. 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 908-915, July.
    5. 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).
    6. BUSSOLO Maurizio & LAY Jann, "undated". "Globalization and Poverty Changes in Colombia," EcoMod2003 330700029, EcoMod.
    7. 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.
    8. Decoster, Andre & Schokkaert, Erik, 1990. "Tax reform results with different demand systems," Journal of Public Economics, Elsevier, vol. 41(3), pages 277-296, April.
    9. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    More about this item

    Keywords

    Computable General Equilibrium Models; Estimation; Personal Income and Wealth Distribution; Measurement and Analysis of Poverty;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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