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Demographics and demand: Evaluation of alternative functional forms

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  • Lyssiotou, Panayiota

Abstract

We evaluate the role of functional form of demographics in demand analysis by proposing the GQL ‘unstructured’ demographically transformed model which nests the Barten–Gorman demographically modified model and popular rank-3 and rank-2 demand systems. We use UK individual data and find that the equivalence of the ‘unstructured’ and Barten–Gorman forms and identification of meaningful equivalence scales depend on the degree of flexibility of the demand system in demographic, price and income effects.

Suggested Citation

  • Lyssiotou, Panayiota, 2012. "Demographics and demand: Evaluation of alternative functional forms," Economics Letters, Elsevier, vol. 117(3), pages 627-631.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:627-631
    DOI: 10.1016/j.econlet.2012.08.001
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    References listed on IDEAS

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    1. Arthur Lewbel, 2003. "A rational rank four demand system," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 127-135.
    2. Panayiota Lyssiotou, 2003. "On estimating the cost of characteristics indices from consumer demand analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 326-349, May.
    3. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 2002. "Nesting quadratic logarithmic demand systems," Economics Letters, Elsevier, vol. 76(3), pages 369-374, August.
    4. 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.
    5. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 1999. "Testing the rank of Engel curves with endogenous expenditure," Economics Letters, Elsevier, vol. 64(1), pages 61-65, July.
    6. Yiguo Sun & Thanasis Stengos & Dianqin Wang, 2006. "Estimates of semiparametric equivalence scales," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 629-639.
    7. Barnes, Roberta & Gillingham, Robert, 1984. "Demographic Effects in Demand Analysis: Estimation of the Quadratic Expenditure System Using Microdata," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 591-601, November.
    8. Arthur Lewbel, 2010. "Shape-Invariant Demand Functions," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 549-556, August.
    9. Christopher J. Nicol, 2001. "The rank and model specification of demand systems: an empirical analysis using United States microdata," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(1), pages 259-289, February.
    10. Ray, Ranjan, 1996. "Demographic Variables in Demand Systems: The Case for Generality," Empirical Economics, Springer, vol. 21(2), pages 307-315.
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    19. Lewbel, Arthur, 1990. "Full Rank Demand Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 289-300, May.
    20. Panayiota Lyssiotou, 2003. "On estimating the cost of characteristics indices from consumer demand analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 326-349, May.
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    Cited by:

    1. Simona Bigerna & Carlo Andrea Bollino & Maria Chiara D’Errico, 2020. "A general expenditure system for estimation of consumer demand functions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 1071-1088, October.

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    More about this item

    Keywords

    Demographics; Equivalence scales; Consumption economies of scale; Barten–Gorman model; GQL model; Preference heterogeneity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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