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A Simple Nested Test of the Almost Ideal Demand System

Author

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  • McLaren, Keith R
  • Fry, Jane M
  • Fry, Tim R L

Abstract

The MPIGLOG specification of an indirect utility function gives rise to Cooper and McLaren's (1992) Modified Almost Ideal Demand System (MAIDS) specification, which nests the Almost Ideal Demand System. Following the "combined" approach outlined by Fry, Fry and McLaren (1993), we transform the deterministic equations to logratio form for estimation. This procedure not only restricts the shares implied by the model to the unit simplex, but also provides a transparent representation of the restriction implied by the Almost Ideal Demand System. We estimate MAIDS (with and without the Almost Ideal Demand System restriction imposed) using the "combined" approach and proceed to test the Almost Ideal Demand System restriction.

Suggested Citation

  • McLaren, Keith R & Fry, Jane M & Fry, Tim R L, 1995. "A Simple Nested Test of the Almost Ideal Demand System," Empirical Economics, Springer, vol. 20(1), pages 149-161.
    • Handle: RePEc:spr:empeco:v:20:y:1995:i:1:p:149-61
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    Cited by:

    1. Barigozzi, Matteo & Alessi, Lucia & Capasso, Marco & Fagiolo, Giorgio, 2012. "The distribution of household consumption-expenditure budget shares," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 69-91.
    2. Berta Ferrer-Rosell & Germà Coenders & Glòria Mateu-Figueras & Vera Pawlowsky-Glahn, 2016. "Understanding Low-Cost Airline Users' Expenditure Patterns and Volume," Tourism Economics, , vol. 22(2), pages 269-291, April.
    3. Jane Fry & Tim Fry & Keith McLaren & Tanya Smith, 2001. "Modelling zeroes in microdata," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 383-392.
    4. Jane Fry & Tim Fry & Keith McLaren, 2000. "Compositional data analysis and zeros in micro data," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 953-959.
    5. Berta Ferrer-Rosell & Germà Coenders & Esther Martínez-Garcia, 2015. "Determinants in Tourist Expenditure Composition — The Role of Airline Types," Tourism Economics, , vol. 21(1), pages 9-32, February.
    6. Steven F. Koch, 2006. "The Aid and Maid System – South African Household Data Pitfalls," Working Papers 024, Economic Research Southern Africa.

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