IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v34y2002i9p1177-1186.html
   My bibliography  Save this article

Estimating and testing the compensated double-log demand model

Author

Listed:
  • Julian Alston
  • James Chalfant
  • Nicholas Piggott

Abstract

In spite of the proliferation of flexible functional forms for consumer demand systems, the double-log demand model continues to be popular, especially in applied work calling for single-equation models. It is usually estimated in uncompensated form. It can also be estimated in compensated form, by deflating the income variable alone using Stone's price index. The compensated form has the same right-hand side as a single-equation version of the popular linear approximation to the Almost Ideal demand model, facilitating the construction of a test for choosing between the two alternatives. This paper demonstrates these results, develops the specification test, and illustrates its application using US meat consumption data. Simulations suggest that the test is well-behaved with good power in typical applications.

Suggested Citation

  • Julian Alston & James Chalfant & Nicholas Piggott, 2002. "Estimating and testing the compensated double-log demand model," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1177-1186.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:9:p:1177-1186
    DOI: 10.1080/00036840110086003
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840110086003
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840110086003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Giancarlo Moschini & Karl D. Meilke, 1989. "Modeling the Pattern of Structural Change in U.S. Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 253-261.
    2. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-793, May.
    3. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
    4. Jeffrey T. LaFrance, 1998. "The Silence Bleating! of the Lambdas: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 221-230.
    5. Julian M. Alston & Douglas M. Larson, 1993. "Hicksian vs. Marshallian Welfare Measures: Why Do We Do What We Do?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 764-769.
    6. Michael K. Wohlgenant, 1985. "Flexible Consumer Demand Functions and Linear Estimation: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 141-142.
    7. Julian M. Alston & James A. Chalfant, 1991. "Unstable Models from Incorrect Forms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1171-1181.
    8. Despotakis, Kostas A., 1986. "Economic performance of flexible functional forms: Implications for equilibrium modeling," European Economic Review, Elsevier, vol. 30(6), pages 1107-1143, December.
    9. Nicholas E. Piggott & James A. Chalfant & Julian M. Alston & Garry R. Griffith, 1996. "Demand Response to Advertising in the Australian Meat Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 268-279.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coloma, Germán, 2023. "Demand estimation and market definition in quality-differentiated products: The case of beer in Argentina," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 69, pages 48-64.
    2. Concetta CASTIGLIONE & Ladislava GROCHOVÁ & Davide INFANTE & Janna SMIRNOVA, 2011. "The demand for beer in presence of past consumption and advertising in the Czech Republic," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 57(12), pages 589-599.
    3. Zhou, Xia (Vivian) & Shaik, Saleem, 2008. "Demand Analysis for Shrimp in the United States," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6524, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Maria Chiara D'Errico & Carlo Andrea Bollino, 2015. "Bayesian Analysis of Demand Elasticity in the Italian Electricity Market," Sustainability, MDPI, vol. 7(9), pages 1-22, September.
    5. Stanislava Grosová & Michal Masár & Olga Kutnohorská & Vladimír Kubeš, 2017. "The demand for beer in Czech Republic: inderstanding longrun on- and off-trade price elasticities," Czech Journal of Food Sciences, Czech Academy of Agricultural Sciences, vol. 35(2), pages 165-170.
    6. Menezes, Carmen F. & Henry Wang, X. & Bigelow, John P., 2005. "Duality and consumption decisions under income and price risk," Journal of Mathematical Economics, Elsevier, vol. 41(3), pages 387-405, April.
    7. Kojima, Yasutomo & Parcell, Joseph L. & Cain, Jewelwayne S., 2014. "A Demand Model of the Wholesale Vegetable Oils Market in the U.S.A," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162472, Southern Agricultural Economics Association.
    8. Coloma, German, 2009. "Estimation of Demand Systems Based on Elasticities of Substitution," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 5(01-2), pages 1-18, March.
    9. Serdar Ongan & Cem Işik & Dilek Özdemir, 2017. "The Effects of Real Exchange Rates and Income on International Tourism Demand for the USA from Some European Union Countries," Economies, MDPI, vol. 5(4), pages 1-11, December.
    10. Liesbeth Colen & Johan Swinnen, 2016. "Economic Growth, Globalisation and Beer Consumption," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(1), pages 186-207, February.
    11. Camilo Sarmiento & Richard Just, 2005. "Empirical modelling of the aggregation error in the representative consumer model," Applied Economics, Taylor & Francis Journals, vol. 37(10), pages 1163-1175.
    12. Musyoka, M.P., 2010. "Using Double-Log Imperfect Import Substitutes Model to Estimate Compensated Elasticities and Welfare Impacts," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95774, African Association of Agricultural Economists (AAAE).
    13. Bernini, Cristina & Cracolici, Maria Francesca, 2015. "Demographic change, tourism expenditure and life cycle behaviour," Tourism Management, Elsevier, vol. 47(C), pages 191-205.
    14. Richard J. Vyn & Getu Hailu, 2015. "Discount Usage and Price Discrimination for Pork Products in Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 63(4), pages 449-474, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Piggott, Nicholas E. & Marsh, Thomas L., 2001. "Impacts of Food Safety on U.S. Meat Demand," 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia 125781, Australian Agricultural and Resource Economics Society.
    2. Vardges Hovhannisyan & Brian W. Gould, 2014. "Structural change in urban Chinese food preferences," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 159-166, March.
    3. Chalfant, James A. & Eshel, Dafna M. Disegni, 2001. "A Nonparametric Test Of Advertising'S Effectiveness," 2001 Annual meeting, August 5-8, Chicago, IL 20529, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Wildner, Susanne, 2001. "Quantifizierung der Preis– und Ausgabenelastizitäten für Nahrungsmittel in Deutschland: Schätzung eines LA/AIDS," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 50(05), pages 1-11.
    5. Rulon D. Pope & Jeffrey T. LaFrance & Timothy K. M.Beatty, 2004. "Building Gorman's Nest," Econometric Society 2004 Australasian Meetings 26, Econometric Society.
    6. Metin Cakir & Joseph V. Balagtas, 2010. "Econometric evidence of cross-market effects of generic dairy advertising," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 83-99.
    7. Vardges Hovhannisyan & Marin Bozic, 2017. "Price Endogeneity and Food Demand in Urban China," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 386-406, June.
    8. repec:ags:ijag24:346834 is not listed on IDEAS
    9. Poray, Michael C. & Foster, Kenneth A. & Dorfman, Jeffrey H., 2000. "Measuring An Almost Ideal Demand System With Generalized Flexible Least Squares," 2000 Annual meeting, July 30-August 2, Tampa, FL 21796, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Okrent, Abigail M. & Alston, Julian M., 2011. "Demand for Food in the United States: A Review of Literature, Evaluation of Previous Estimates, and Presentation of New Estimates of Demand," Monographs, University of California, Davis, Giannini Foundation, number 251908.
    11. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R. & Griffiths, William E. & Piggott, Roley R., 2000. "An Equilibrium Displacement Model of the Australian Beef Industry," Research Reports 28007, New South Wales Department of Primary Industries Research Economists.
    12. Kyrre Rickertsen, 1998. "The demand for food and beverages in Norway," Agricultural Economics, International Association of Agricultural Economists, vol. 18(1), pages 89-100, January.
    13. Luke, Jaime R. & Tonsor, Glynn T. & Brown, D. Scott, 2024. "Wholesale pork demand: Understanding primal-level heterogeneity," Journal of Commodity Markets, Elsevier, vol. 34(C).
    14. Sherafatmand, Habibeh & Baghestany, Ali Akbar, 2015. "Comparison of Rotterdam Model versus almost ideal demand system for fish and red meat," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 54(01), June.
    15. Matteo Manera & Bruno Sitzia, 2005. "Empirical factor demands and flexible functional forms: a bayesian approach," Economic Systems Research, Taylor & Francis Journals, vol. 17(1), pages 57-75.
    16. Alston, Julian M. & Chalfant, James A., 1992. "Consumer Demand Analysis According To Garp," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 21(2), pages 1-15, October.
    17. LaFrance, J. T. & Beatty, T. K. M. & Pope, R. D. & Agnew, G. K., 2002. "Information theoretic measures of the income distribution in food demand," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 235-257, March.
    18. Fabian Bergès & Daniel Hassan & Sylvette Monier-Dilhan, 2013. "Are Consumers More Loyal To National Brands Than To Private Labels?," Bulletin of Economic Research, Wiley Blackwell, vol. 65, pages 1-16, May.
    19. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September.
    20. Karagiannis, G. & Katranidis, S. & Velentzas, K., 2000. "An error correction almost ideal demand system for meat in Greece," Agricultural Economics, Blackwell, vol. 22(1), pages 29-35, January.
    21. Toshinobu Matsuda, 2007. "Linearizing the inverse quadratic almost ideal demand system," Applied Economics, Taylor & Francis Journals, vol. 39(3), pages 381-396.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:34:y:2002:i:9:p:1177-1186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.