IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/651.html
   My bibliography  Save this paper

Tricks With Hicks: The EASI Demand System

Author

Listed:
  • Arthur Lewbel

    (Boston College)

  • Krishna Pendakur

    (Simon Fraser University)

Abstract

We invent Implicit Marshallian Demands, a new type of demand function that combines desirable features of Hicksian and Marshallian demand functions. We propose and estimate the Exact Affine Stone Index (EASI) Implicit Marshallian Demand system. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike the AID, EASI demands can have any rank and its Engel curves can be polynomials or splines of any order in real expenditures. EASI error terms equal random utility parameters to account for unobserved preference heterogeneity. EASI demand functions can be estimated using ordinary GMM, and, like AID, an approximate EASI model can be estimated by linear regression.

Suggested Citation

  • Arthur Lewbel & Krishna Pendakur, 2006. "Tricks With Hicks: The EASI Demand System," Boston College Working Papers in Economics 651, Boston College Department of Economics, revised 26 Nov 2008.
    • Handle: RePEc:boc:bocoec:651
    as

    Download full text from publisher

    File URL: https://fmwww.bc.edu/EC-P/wp651.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Richard Blundell & Xiaohong Chen & Dennis Kristensen, 2003. "Nonparametric IV estimation of shape-invariant Engel curves," CeMMAP working papers CWP15/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    3. Ryan, David L & Wales, Terence J, 1998. "A Simple Method for Imposing Local Curvature in Some Flexible Consumer-Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 331-338, July.
    4. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    5. Soest, Arthur van & Kapteyn, Arie & Kooreman, Peter, 1993. "Coherency and regularity of demand systems with equality and inequality constraints," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 161-188.
    6. Donald J. Brown & Rosa L. Matzkin, 1998. "Estimation of Nonparametric Functions in Simultaneous Equations Models, with an Application to Consumer Demand," Cowles Foundation Discussion Papers 1175, Cowles Foundation for Research in Economics, Yale University.
    7. Richard Blundell & Xiaohong Chen & Dennis Kristensen, 2007. "Semi-Nonparametric IV Estimation of Shape-Invariant Engel Curves," Econometrica, Econometric Society, vol. 75(6), pages 1613-1669, November.
    8. Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
    9. Pendakur, Krishna, 2002. "Taking prices seriously in the measurement of inequality," Journal of Public Economics, Elsevier, vol. 86(1), pages 47-69, October.
    10. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, 2013. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1267-1303.
    11. Arthur Lewbel, 2001. "Demand Systems with and without Errors," American Economic Review, American Economic Association, vol. 91(3), pages 611-618, June.
    12. Pollak, Robert A & Wales, Terence J, 1980. "Comparison of the Quadratic Expenditure System and Translog Demand Systems with Alternative Specifications of Demographic Effects," Econometrica, Econometric Society, vol. 48(3), pages 595-612, April.
    13. Walter Beckert & Richard Blundell, 2004. "Invertibility of Nonparametric Stochastic Demand Functions," Birkbeck Working Papers in Economics and Finance 0406, Birkbeck, Department of Economics, Mathematics & Statistics.
    14. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    15. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
    16. Blackorby, Charles & Donaldson, David, 1980. "A Theoretical Treatment of Indices of Absolute Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 107-136, February.
    17. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-730, May.
    18. Brown, Bryan W & Walker, Mary Beth, 1989. "The Random Utility Hypothesis and Inference in Demand Systems," Econometrica, Econometric Society, vol. 57(4), pages 815-829, July.
    19. Lewbel, Arthur, 1989. "Household equivalence scales and welfare comparisons," Journal of Public Economics, Elsevier, vol. 39(3), pages 377-391, August.
    20. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Song, Ze & Li, Lianyou & Ma, Chao, 2013. "The EASI Demand System : Evidence from China Household," MPRA Paper 48435, University Library of Munich, Germany.
    2. Knobel, Alexander (Кнобель, Александр) & Chentsov, Alexander (Ченцов, Александр), 2018. "The Impact of Exchange Rates and Their Volatility on Russia's Foreign Trade, Taking into Account its Membership in EAEU [Влияние Обменных Курсов И Их Волатильности На Внешнюю Торговлю России С Учет," Working Papers 061824, Russian Presidential Academy of National Economy and Public Administration.
    3. McAleer, Michael & Medeiros, Marcelo C. & Slottje, Daniel, 2008. "A neural network demand system with heteroskedastic errors," Journal of Econometrics, Elsevier, vol. 147(2), pages 359-371, December.
    4. Mette Christensen, 2007. "Integrability of Demand Accounting for Unobservable Heterogeneity: A Test on Panel Data," Economics Discussion Paper Series 0713, Economics, The University of Manchester.
    5. Arthur Lewbel & Serena Ng, 2005. "Demand Systems with Nonstationary Prices," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 479-494, August.
    6. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    7. Mette Lunde Christensen, 2002. "Heterogeneity in consumer demands and the income effect: evidence from panel data," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-1, International Conferences on Panel Data.
    8. Laura Blow, 2003. "Demographics in demand systems," IFS Working Papers W03/18, Institute for Fiscal Studies.
    9. Matteo Barigozzi & Alessio Moneta, 2016. "Identifying the Independent Sources of Consumption Variation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 420-449, March.
    10. Krishna Pendakur & Stefan Sperlich, 2010. "Semiparametric estimation of consumer demand systems in real expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(3), pages 420-457.
    11. LaFrance, Jeffrey T., 2008. "The structure of US food demand," Journal of Econometrics, Elsevier, vol. 147(2), pages 336-349, December.
    12. Li, Lianyou & Song, Ze & Ma, Chao, 2015. "Engel curves and price elasticity in urban Chinese Households," Economic Modelling, Elsevier, vol. 44(C), pages 236-242.
    13. Hubner, Stefan, 2023. "Identification of unobserved distribution factors and preferences in the collective household model," Journal of Econometrics, Elsevier, vol. 234(1), pages 301-326.
    14. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January.
    15. Christian Dudel & Jan Marvin Garbuszus & Julian Schmied, 2021. "Assessing differences in household needs: a comparison of approaches for the estimation of equivalence scales using German expenditure data," Empirical Economics, Springer, vol. 60(4), pages 1629-1659, April.
    16. Arthur Lewbel & Samuel Norris & Krishna Pendakur & Xi Qu, 2022. "Consumption peer effects and utility needs in India," Quantitative Economics, Econometric Society, vol. 13(3), pages 1257-1295, July.
    17. Zapata, Hector O. & Sulgham, Anil K., 2006. "A Semiparametric Approach to Estimate Engel curves using the US Micro Data," 2006 Annual meeting, July 23-26, Long Beach, CA 21092, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Nicholas Oulton, 2012. "How To Measure Living Standards And Productivity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(3), pages 424-456, September.
    19. Arthur Lewbel & Krishna Pendakur, 2024. "Estimating a model of inefficient cooperation and consumption in collective households," Review of Economics of the Household, Springer, vol. 22(3), pages 865-907, September.
    20. Gong, X. & van Soest, A.H.O. & Zhang, P., 2000. "Sexual Bias and Household Consumption : A Semiparametic Analysis of Engel curves in Rural China," Discussion Paper 2000-45, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    Consumer demand; Demand systems; Hicks; Marshallian; Cost functions; Expenditure functions; Utility; Engel curves.;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:651. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.