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Using Elasticities from an Almost Ideal Demand System? Watch Out for Group Expenditure!
Author(s) -
Thompson Wyatt
Publication year - 2004
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.0002-9092.2004.00656.x
Subject(s) - almost ideal demand system , economics , panacea (medicine) , group (periodic table) , econometrics , ideal (ethics) , microeconomics , production (economics) , medicine , philosophy , chemistry , alternative medicine , organic chemistry , epistemology , pathology
Group expenditure has often been treated as exogenous when estimating demand parameters for a group of commodities with an almost ideal demand system. Researchers draw demand elasticities from past literature to use in their own analysis, but elasticities contingent on exogenous group expenditure may be inappropriate. Here, the approach is considered in the case of Japanese meat demand with a simple equation added to estimate group expenditures. The results show that elasticities should be revised and that a group expenditure equation is not a panacea as it may result in the violation of theoretical restrictions, such as symmetry.