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Estimation in large and disaggregated demand systems: An estimator for conditionally linear systems

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  • Richard Blundell
  • Jean Marc Robin

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

Abstract

Empirical demand systems that do not impose unreasonable restrictions on preferences are typically nonlinear. We show, however, that all popular systems possess the property of conditional linearity. A computationally attractive iterated linear least squares estimator (ILLE) is proposed for large non-linear simultaneous equation systems which are conditionally linear in unknown parameters. The estimator is shown to be consistent and its asymptotic efficiency properties are derived. An application is given for a 22-commodity quadratic demand system using household-level data from a time series of repeated cross-sections. Copyright (C) 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Richard Blundell & Jean Marc Robin, 1999. "Estimation in large and disaggregated demand systems: An estimator for conditionally linear systems," Post-Print hal-02878032, HAL.
    • Handle: RePEc:hal:journl:hal-02878032
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    References listed on IDEAS

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    1. Blundell, R. W., 1980. "Estimating continuous consumer equivalence scales in an expenditure model with labour supply," European Economic Review, Elsevier, vol. 14(2), pages 145-157.
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    6. Hausman, J. A. & Newey, W. K. & Powell, J. L., 1995. "Nonlinear errors in variables Estimation of some Engel curves," Journal of Econometrics, Elsevier, vol. 65(1), pages 205-233, January.
    7. Ng, Serena, 1995. "Testing for Homogeneity in Demand Systems When the Regressors Are Nonstationary," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 147-163, April-Jun.
    8. Jorgenson, Dale W & Lau, Lawrence J & Stoker, Thomas M, 1980. "Welfare Comparison under Exact Aggregation," American Economic Review, American Economic Association, vol. 70(2), pages 268-272, May.
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