A Simple Method for Imposing Local Curvature in Some Flexible Consumer-Demand Systems

The authors introduce a procedure for imposing curvature conditions locally in a class of flexible demand systems. Aside from the simplicity of the procedure, a major advantage is that flexibility is maintained. The authors illustrate the technique by estimating three flexible demand systems--the normalized quadratic, the almost ideal, and the linear translog--using highly aggregated Canadian data for the period 1947 through 1993. When curvature is not imposed, these demand systems violate the appropriate curvature conditions at every data point. When curvature is imposed, curvature conditions are satisfied not only at the point of imposition but at every data point.